Using a UAE holding company for international investments

Founders and investors who move to the UAE often ask whether they should hold their operating companies and investments through a UAE holding company. The UAE corporate tax regime contains specific exemptions for dividends and gains on shareholdings. This guide sets out how they work under Federal Decree-Law No. 47 of 2022 on the Taxation of Corporations and Businesses (the Corporate Tax Law) and the decisions issued under it.

The basic position

• Corporate tax is charged at 0% on taxable income up to AED 375,000 and 9% above that amount (Article 3 of the Corporate Tax Law and Cabinet Decision No. 116 of 2022).
• A holding company is a taxable person like any other UAE company. It must register for corporate tax within three months of incorporation, including in a free zone, under FTA Decision No. 3 of 2024.
• Article 22 lists income that is exempt from corporate tax. A well-structured holding company relies mainly on two of these exemptions.

Dividends from UAE companies

Article 22 exempts "dividends and other profit distributions received from a juridical person that is a Resident Person". Dividends that a UAE holding company receives from its UAE subsidiaries are therefore exempt, with no minimum shareholding or holding period.

The participation exemption for foreign and other shareholdings

Article 23 exempts dividends from a foreign participation and other income from a participating interest. As summarised by the FTA's Participation Exemption Guide, this covers foreign dividends, capital gains and other income from qualifying shareholdings. The main conditions are:

• Ownership: an interest of 5% or more in the shares or capital of the company. Under Ministerial Decision No. 302 of 2024, an acquisition cost of at least AED 4 million can satisfy this test where the interest is below 5%.
• Holding period: the interest is held, or intended to be held, for at least 12 uninterrupted months.
• Subject to tax: the company is subject to corporate tax or a similar tax. Ministerial Decision No. 302 of 2024 treats a foreign country as meeting this test where its statutory rate is not less than 9%.
• Profit and liquidation rights: the holder is entitled to at least 5% of distributable profits and liquidation proceeds, or meets the AED 4 million alternative.
• Asset test: not more than 50% of the company's direct and indirect assets consist of interests that would not themselves qualify. Under Ministerial Decision No. 302 of 2024, this test applies only where the company is a related party of the holder.

The exemption does not apply to a distribution that the paying company can deduct for tax purposes. Ministerial Decision No. 302 of 2024 applies to tax periods starting on or after 1 January 2025 and repealed Ministerial Decision No. 116 of 2023.

Holding through a free zone company

A Qualifying Free Zone Person pays 0% on qualifying income. Ministerial Decision No. 229 of 2025, which repealed Ministerial Decision No. 265 of 2023, lists "holding of shares and other securities for investment purposes" as a Qualifying Activity. Free zone status brings its own conditions, including adequate substance in the UAE, so the choice between free zone and mainland should be made with the whole group in view. See free zone or mainland.

Tax groups

A UAE holding company and its UAE subsidiaries can apply to form a tax group and file a single return where, among other conditions in Article 40:

• the parent holds at least 95% of the share capital and voting rights, and is entitled to at least 95% of profits and net assets, directly or indirectly;
• all members are resident juridical persons with the same financial year and the same accounting standards;
• none is an Exempt Person or a Qualifying Free Zone Person.

Dividends paid out of the UAE

The UAE applies withholding tax at 0% on UAE-sourced payments to non-residents, so dividends paid by a UAE holding company to a foreign shareholder are not subject to UAE withholding tax. Whether those dividends are taxed in the shareholder's own country depends on that country's rules.

What to do

• List each shareholding the holding company will own and check it against the 5% or AED 4 million test, the 12-month period and the 9% subject-to-tax condition.
• Check whether any existing shareholdings would be transferred into the new company, as transfers can trigger tax at home and specific UAE rules.
• Decide between a free zone and a mainland holding company, and whether a tax group would help.
• Register for corporate tax within three months of incorporation and keep evidence of ownership, acquisition cost and holding periods.

Our corporate tax and company setup and PRO services cover structuring, registration and filing for holding companies.

Sources

• Ministry of Finance: Federal Decree-Law No. 47 of 2022 and its amendments
• Ministry of Finance: Cabinet Decision No. 116 of 2022 on the annual taxable income subject to corporate tax
• Ministry of Finance: Ministerial Decision No. 229 of 2025 on Qualifying Activities and Excluded Activities
• PwC: Ministerial Decision No. 302 of 2024 on the participation exemption
• KPMG: New Ministerial Decision on the participation exemption
• DLA Piper: FTA publishes Participation Exemption Guide
• Deloitte: FTA Decision on corporate tax registration timelines
• PwC Worldwide Tax Summaries: UAE withholding taxes

This page gives general information as at the date shown and is not advice for your specific situation. Rules in other countries are summarised for orientation; your home-country position should be confirmed before you act.