Can I Save Tax by Setting Up a Company in Dubai?

Yes, apparently you can save tax by setting up a company in Dubai, but only if you plan properly, understand the new UAE corporate tax rules, and choose the right structure.

Table of Contents

1. Overview of Tax in Dubai

When people hear “Dubai”, they still think “zero tax”. However, the rules have changed:

Corporate tax:
- 0% on taxable profits up to AED 375,000
- 9% on profits above AED 375,000 for most businesses
Free zone companies: still 0% corporate tax on qualifying income if they meet the Qualifying Free Zone Person (QFZP) conditions. Non-qualifying income is taxed at 9%.
Personal income tax: none on salaries and dividends in the UAE.
VAT: generally 5% on most goods and services.

Therefore, you don’t automatically avoid tax just by opening a company in Dubai. Instead, you need to structure your business setup in Dubai carefully.

2. Mainland vs Free Zone vs “Offshore” – Tax Snapshot

When you plan company formation in Dubai, you typically look at three broad options.

Option	Corporate Tax	Typical Use Case
Dubai mainland company	0% up to AED 375,000; 9% above that	Local trading, retail, onshore services
Dubai free zone company	0% on qualifying income if QFZP; 9% on other income	International trade, online services, holding structures
Offshore / holding structure	Often 0% in UAE, but subject to home-country rules	Asset holding, SPVs, international structuring

Free zone tax benefits now depend on rules around qualifying activities, economic substance, and limiting non-qualifying income (usually below 5% or AED thresholds – the “de minimis rule”).

3. How a Dubai Company Can Help You Save Tax

Usually, you may actually save tax with a Dubai business setup in several scenarios:

3.1 Relocating from a High-Tax Country

Apparently, If you move your genuine business operations to Dubai and become tax resident under UAE rules and also possibly non-resident in your previous country, after that :

Your company profits may face only UAE 9% corporate tax or 0% in a qualifying free zone.
Your personal income from the Dubai company (dividends/salary) is normally not taxed in the UAE.

However, your home country’s exit tax, CFC rules, and treaty network still matter. You should always check this with a qualified international tax adviser.

3.2 Free Zone Company Serving Foreign Clients

If you run an online or consulting business and sell mainly to clients outside the UAE mainland, a Dubai free zone company may:

Qualify as a QFZP (Qualifying Free Zone Person).
Enjoy 0% corporate tax on qualifying income.
Usually may Pay 9% corporate tax only on non-qualifying revenue for eg:+, certain transactions with UAE mainland.

Besides this, many digital businesses use free zones such as DAFZ, DMCC, JAFZA or IFZA, to minimize global effective tax rates while remaining compliant.

3.3 E-Logistics,Trading & Commerce

Apparently, for e-commerce and trading companies, Dubai free zones typically offer:

Provide 0% tax on qualifying export-oriented activities.
infrastructure & Strategic location for distribution & shipping.
100% foreign ownership & Simplified customs processes.

As a result, your effective global tax rate may drop significantly, especially if your current jurisdiction taxes corporate profits at 20–30%+.

4. Understanding “Qualifying Free Zone Person” (QFZP)

To keep the 0% tax on qualifying income, your Dubai free zone company must usually:

Be incorporated in a designated free zone.
Carry out qualifying activities (e.g. services to foreign clients, certain trading and logistics).
Maintain economic substance: real office, staff, and UAE operating costs.
Maintain audited financial statements and proper transfer pricing documentation.
Keep non-qualifying revenue under the de minimis limit (often lower of 5% of total revenue or AED threshold).

If you don’t meet these conditions, your free zone business can lose its 0% status and pay 9% corporate tax on relevant income.

5. Common Myths About Tax Saving in Dubai

When we talk to entrepreneurs exploring Black Swan Business Setup Service, we see the same misconceptions:

“Every free zone company pays 0% tax forever.”
In reality, the 0% rate now applies only to qualifying income of a QFZP. If you cross the de minimis limit or earn excluded income (like certain mainland revenues or immovable property income), 9% can apply.
“I can run everything from my home country but book profits in Dubai.”
Many countries have controlled foreign company (CFC) rules and anti-avoidance laws. If management and control are effectively outside the UAE, your home tax authority may still tax the profits.
“No need for bookkeeping, it’s Dubai!”
Under the new corporate tax regime, you must register with the FTA, maintain proper accounts, and file tax returns, whether you are in mainland or free zone. Over 640,000 companies have already entered the system.
“A Dubai company automatically hides income from my home country.”
With global information-sharing (CRS, exchange of information treaties), simply forming a company abroad does not hide income. You still need to report correctly where you are legally required.

6. How Black Swan Business Setup Service Can Help

Setting up a tax-efficient company in Dubai is not just about picking the cheapest licence. It is about integrating legal, tax, banking and substance into one clear plan.

Black Swan Business Setup Service can assist you with:

Initial tax and structuring review
We look at your business model, target markets and home-country rules, then suggest whether a Dubai mainland company, Dubai free zone company, or multi-entity structure makes sense.
Jurisdiction and free zone selection
We compare relevant free zones (e.g. DMCC, IFZA, RAKEZ, etc.) depending on your expected qualifying income profile, substance needs and activity.
End to end business setup in Dubai:-
We usually handle bank account introductions, immigration support, licensing and documentation, so the you can focus on operations.
Ongoing compliance
We coordinate with accounting and tax partners to help you stay compliant with corporate tax, VAT, and economic substance tests year after year.

As a result, you don’t just “open a company in Dubai”; you build a sustainable, compliant structure that can genuinely optimize your tax position.

Related Articles:

» UAE Corporate Tax Law: Who Needs to Pay Tax?

» Difference Between VAT and Corporate Tax in Dubai

» Tax penalties in UAE

» Steps to Setting up a New Business in Dubai

» Benefits of Setting Up Your Business in Dubai

Understanding Dubai’s Tax-Saving Potential

Is it possible for you to save tax by setting up a company in Dubai?
Yes, definitely, if you:

Select the right structure (free zone vs, mainland).
Qualify correctly as a QFZP where applicable.
Maintain real substance and proper compliance.
You can Coordinate your UAE setup with tax rules in your home country.

On top of that, Dubai remains one of the most attractive hubs globally for digital businesses, investors, consultants and entrepreneurs. Anyhow, the era of “set up and forget” is over. Therefore, Thoughtful planning with an experienced partner such as Black Swan Business Setup Service can turn Dubai into a powerful, compliant tax-efficient base instead of an expensive experiment.

FAQs on “Saving Tax by Setting Up a Company in Dubai”

1. Is Dubai still tax-free for companies?

Dubai is no longer completely tax-free. Most businesses now fall under the UAE corporate tax regime: 0% on taxable profits up to AED 375,000 and 9% on income above that. Certain free zone companies can still enjoy 0% on qualifying income if they meet QFZP conditions.

2. Is it possible for a Dubai free zone company to really pay 0% corporate tax?

Yes, normally, a Dubai free zone company can still pay 0% corporate tax on qualifying income if it qualifies as a Qualifying Free Zone Person. Moreover, It must meet tests relating to limits on non-qualifying income, audited accounts, qualifying activities, and economic substance. Apart from that, the 9% rate applies to relevant income.

3. Should I pay personal income tax on dividends or salary from my Dubai company?

Usually, the UAE does not levy personal income tax on dividends or salaries. Anyhow, your home country may apply CFC rules or tax your worldwide income, therefore you must check local laws before relying on this benefit.

4. Does a Dubai company automatically cut my tax bill in my home country?

Not automatically. Honestly, many countries tax residents on worldwide income and have anti-avoidance rules. In addition, to genuinely reduce your overall tax burden, you may need to change tax residency, adjust your structure, or use a compliant holding setup, all under professional advice.

5. Which is the better option for tax: Dubai free zone or Dubai mainland?

It usually depends on your business model. Mainland companies suit businesses that sell to the UAE market and accept the standard 0%/9% corporate tax slab. Consequently, Free zone companies can be more tax-efficient for export-oriented or online services if they qualify for the 0% rate on qualifying income and maintain substance.

6. What is “qualifying income” in a free zone?

“Qualifying income” generally means income from permitted activities carried out in or from the free zone — for example, services to foreign clients or dealings with other free zone entities — subject to detailed rules. Income from certain mainland activities, immovable property or excluded sectors may not qualify and is taxed at 9%.

7. Is it necessary to have an office and staff in Dubai to benefit from free zone tax incentives?

Usually, yes. To meet the economic substance requirement, your free zone company should have adequate office space, real operating expenses and relevant employees or outsourced resources in the UAE. Paper-only “shell” companies risk losing their tax benefits.

8. How does VAT affect a Dubai company?

Usually, most businesses in the UAE must register for VAT at 5%, subject to activity thresholds & turnover. Moreover, VAT is separate from corporate tax, so you need to handle VAT registration, returns and invoicing correctly even if your corporate tax rate is 0% on qualifying income.

9. Can I bill UAE mainland clients from a free zone company and still pay 0%?

Often not, or not entirely. Income from mainland clients is frequently treated as non-qualifying income and may be subject to 9% corporate tax or require a mainland branch/distributor structure. Careful planning is crucial before you start selling into the local market.

10. Do I need to register for UAE corporate tax if my free zone company is at 0%?

Yes. Even if you expect to pay 0% on qualifying income, you usually must register for corporate tax, maintain audited accounts, and file returns to prove your eligibility and avoid penalties.

11. How does Black Swan Business Setup Service help me save tax in Dubai?

Usually, Black Swan Business Setup Service can help you coordinate with tax & accounting partners, manage the company formation in Dubai, design a compliant structure, select the right jurisdiction (specific free zone vs mainland ) & assess your situation. Consequently, this approach helps you legitimately reduce your effective tax rate while staying within UAE and international rules.