Taxes in Dubai: the 9% corporate tax
Corporate tax is the corporate income tax of the United Arab Emirates, in force since 1 June 2023. The general rate is 9% on net profit, one of the lowest in the world and well below the 25% of Spanish corporate tax or the 21% of Portuguese IRC.
It affects both mainland and free zone companies, unless the latter meet the requirements of the "qualifying free zone person" regime. It does not tax individuals: salaries and wages continue to be taxed at 0%.
The AED 375,000 threshold: how much you pay in practice
The first AED 375,000 of annual profit (around €94,000 at the current exchange rate) is taxed at 0%. Only the excess pays 9%, which means that an SME with moderate profits has a very small or even zero tax bill.
A concrete example: if your company reports AED 500,000 in profit, you pay 9% only on the AED 125,000 that exceeds the threshold, that is, AED 11,250 per year. For many Spanish SMEs planning their internationalisation, this margin is one of the attractions of setting up in the UAE.
5% VAT in Dubai
VAT (Value Added Tax) was introduced on 1 January 2018 with a general rate of 5%. It applies to most goods and services, although with specific categories that reduce the burden for exporting companies.
Key points
- General rate: 5%
- 0% rate: exports, international transport, investment precious metals
- Exempt: financial services, residential housing, undeveloped land
- Mandatory registration if you invoice more than AED 375,000 per year
- Voluntary registration from AED 187,500
0% personal income tax: what it means and what it does not
In the United Arab Emirates there is no personal income tax. Salaries, self-employed income and dividends distributed to partners are taxed at 0%, a notable difference compared with Spanish personal income tax or Portuguese IRS.
This does not turn the UAE into a tax haven. Since 2023 there has been corporate tax, a requirement to register the ultimate beneficial owner (UBO) and a double taxation treaty signed with Spain. If you are a Spanish tax resident, the Spanish tax authority will still have something to say about your worldwide income: invoicing from Dubai is not enough to stop paying tax in Spain.
Free zone vs mainland for tax purposes
A mainland company pays 9% on profits above the AED 375,000 threshold, with no further nuances. In a free zone, if your company meets the requirements of a "qualifying free zone person" (QFZP), it can pay 0% on its qualifying income and 9% only on the rest.
The requirements are not trivial: you need real economic substance, income that qualifies, audited financial statements and compliance with the de minimis rule (non-qualifying income below 5% of the total or AED 5 million). For most SMEs, the choice between free zone and mainland depends more on where you are going to operate than on the savings.
Other tax obligations in Dubai
In addition to corporate tax and VAT, there are excise taxes and formal duties that should be kept under control from day one to avoid penalties.
Key points
- Excise tax on tobacco, energy drinks and carbonated drinks
- Quarterly VAT returns
- Ultimate beneficial owner (UBO) registration
- Audited accounting in many free zones
- Economic Substance Regulations for certain activities
