What is the personal income tax in the UAE?

The UAE does not apply personal income tax to any active or passive personal income. This includes income from freelancing activities, dividends, interest and royalties. All residents, both UAE nationals and foreign nationals who are permanent tax residents in the UAE, are exempt from personal income tax.

However, if passive income is received from a foreign company, it might be subject to withholding taxes. For example, if an individual (UAE tax resident) receives dividends from a Dutch company, dividends would be subject to a withholding tax of 10% in the Netherlands.

In case an individual possesses passive investments, holding companies might be used to make the structure more tax effective. For example, if a UAE company receives dividends from a Dutch subsidiary, dividends could be subject to either 5% or 0% tax rate, depending on case-specific circumstances. The UAE holding, however, might distribute these dividends to individual shareholders, without any taxes being applied.

We advise you to discuss your business model and desired activities with us. That way we can find the most tax efficient model. It might help to save high costs and avoid unexpected issues in the future.

Feel free to contact us if you have any questions, would like to find out more about other tax laws or discuss your business model in order to find the most tax efficient way to structure you company and avoid unexpected issues.