Tax and Compliance for European Companies in Dubai
- 13.09.2025
- Posted by: Uwe Hohmann
- Categories: Tax, Dubai
Dubai has become a natural choice for European businesses looking to expand internationally. The city offers a competitive tax system and access to global markets. However, while the UAE is known for its business-friendly environment, tax and compliance requirements have become more structured in recent years. European companies considering a move should thoroughly understand the rules to avoid potential setbacks later.
CIT (Corporate Income Tax)
The UAE has federal CIT in line with global developments. The standard rate is 0% on taxable income up to AED 375,000 and 9% on income above that threshold. For large multinational groups, different rules apply under the OECD’s (Organisation for Economic Co-operation and Development’s) Pillar Two framework, which imposes a 15% minimum tax on qualifying companies.
For European businesses, this is still a highly competitive tax environment compared to many jurisdictions in the EU, where CIT rates are significantly higher. The new regime means planning is important: structuring entities correctly and aligning transfer pricing policies with UAE requirements can help ensure compliance while optimising tax outcomes.
VAT (Value Added Tax)
The UAE applies a VAT system at a standard rate of 5%. Companies must register once they exceed the turnover threshold, and certain goods and services qualify for zero-rating or exemptions. While VAT is not new to European companies, many business owners find the UAE framework relatively simple compared to the more complex VAT structures across Europe. Still, accurate record-keeping and timely filings are essential, as penalties can apply for non-compliance.
Withholding Tax and Double Taxation Treaties
One of the advantages that stands out for European investors is the absence of withholding tax on dividends, interest, and royalties in most cases. This creates a favourable environment for holding companies and financing structures, as it avoids additional taxation on cross-border flows.
Additionally, the UAE has signed a comprehensive network of DTAs (double taxation agreements) with numerous European countries. These agreements provide certainty and help prevent businesses from being taxed twice on the same income, a key factor for groups managing cross-border operations.
Compliance Beyond Tax
European businesses expanding to Dubai must also be aware of broader compliance requirements. The UAE enforces Anti-Money Laundering (AML) regulations that require companies in certain sectors to implement proper controls and reporting systems. Ultimate Beneficial Owner (UBO) rules are in place to ensure transparency, requiring entities to declare and maintain up-to-date information about their ownership structure.
Transfer Pricing
Transfer pricing rules have also been formalised. Companies falling within scope must maintain documentation aligned with international standards, including master and local files. This is particularly relevant for European firms that operate multiple entities across borders, as intra-group transactions must be priced and documented appropriately.
TME Services - Your Complete Business Partner
For European companies, Dubai offers an attractive balance of low tax rates, central location, and access to global markets. However, the introduction of CIT, the enforcement of AML and UBO rules, and the formalisation of transfer pricing regulations, when applicable, mean that setup and ongoing compliance must be handled carefully.
At TME Services, we assist European businesses in managing these requirements with tailored tax and compliance strategies.
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