Is the UAE Still a Tax Haven? Entrepreneur Insights 2025

The United Arab Emirates (UAE) is still seen as one of the world’s most attractive places for global investors and entrepreneurs because it’s a tax-friendly jurisdiction. In recent years, the country did implement some important tax reforms to align with international norms, which still makes the tax environment more competitive than most other countries in the world.

The tax structure should be clear to any business owner looking to set up an Offshore, Free Zone or Dubai Mainland company. This is a simplified but comprehensive breakdown.

Distinct Business Areas Within UAE

Mainland – Total access to the UAE market and permits 100% foreign ownership.
Free Zones – Business regions with tax incentives, full profit repatriation, but narrow business scope.
Offshore – No physical presence needed. Best for holding companies and international trade.

CIT (Corporate Income Tax) – Comes into effect June 1, 2023.

0% when taxable income does not exceed AED 375,000.
9% when taxable income exceeds AED 375,000.
15% of income when pertaining to multinational companies under OECD Pillar Two (revenue surpassing €750 million).

Who is mandated to comply?

Companies in the Mainland
Free Zone Companies (qualifying free zone companies)
Offshore Companies (Only if the income is sourced from within the UAE)

VAT (Value Added Tax) – Implemented 2018

Rate: 5% on most goods and services
Mandatory registration: Revenue > AED 375,000
Voluntary registration: Revenue > AED 187,500
Application Scope:
Mainland: Fully applicable
Free Zones: Applicable (except “designated zones”)
Offshore: Not applicable

Excise Tax – On Specific Goods

100% on tobacco and vape products
50% on confectionery and soft drinks
Applies to: producers, importers, and stockpilers from Mainland and Free Zones

Customs Duty

Standard rate: 5% on CIF (cost + insurance + freight) of imports
Higher duty: Up to 100% on alcohol and tobacco
Companies in Free Zones commonly enjoy customs exemptions when trading within their zone.

Municipality Tax (Rental Tax)

Residential properties: 5% of the annual rent
Commercial properties: 10% of the annual rent
Automatically included in DEWA utility bills in the Mainland.

Tourism Dirham Fee

Relevant to hotels, resorts, and holiday homes
Charged per room, per night AED 7 to AED 20 depending on hotel type.
Applicable in Mainland and Free Zones (hospitality sector only).

Economic Substance Regulations (ESR)

Not a tax but rather a compliance burden.
Relevant to sectors such as banking, insurance, leasing, holding companies, etc.

Demands:

Local presence in UAE
Employed in the country
Annual ESR returns

Country-by-Country Reporting (CbCR)

Compulsory for multinational groups with consolidated revenue wchic have revenue more than AED 3.15 billion
Needs to submit income, taxes paid, and activities in different jurisdictions

Personal Income Tax – Still 0%

No personal income tax in the UAE
No tax on salary, capital gains, inheritance, or dividends income
One of the biggest benefits of moving to UAE.

Conclusion

The UAE is relentlessly striking a reasonable balance between safe business regulation and compliant international taxation. No matter if you place your business in the Mainland, Free Zone or Offshore, it is very important to understand your tax obligations for sustained success.

Need Help with Your UAE Business Setup or Tax Compliance?
If you are experiencing difficulty navigating the UAE, as it becomes more complicated with continually evolving taxes and regulations, Taxtube can help.