corpus/uae.md

# United Arab Emirates
as_of: 2026-08 (verify rates before relying on them)

## Entity types
- **Free zone company (FZE/FZCO)** — 100% foreign ownership, zone-specific licensing. 45+ zones; the ones that matter: **DIFC** and **ADGM** (financial, own common-law courts and companies law — investor-preferred), **DMCC** (commodities/trading), **Dubai Internet City** (tech), **IFZA/RAKEZ/SHAMS** (cheap general-purpose).
- **Mainland LLC** — 100% foreign ownership now allowed for most activities (since 2021); needed to trade freely onshore in the UAE without a distributor.
- **Freelance permit** — solo operators, cheap.

## Tax
- Corporate tax: **9%** on taxable income above AED 375k (from June 2023). 0% below.
- **Qualifying Free Zone Person: 0%** on qualifying income (trading with other free zones / abroad; regulated financial services in DIFC/ADGM; lists expanded 2025-08 by MD 229/230 to more commodities, carbon credits, renewables). **De minimis**: non-qualifying revenue above the lower of 5% or AED 5M strips QFZP status for the current + next 4 tax periods → 9% on everything. QFZPs must prepare audited financial statements.
- **Small Business Relief**: elect zero taxable income if revenue ≤ AED 3M — transitional, only for tax periods ending on or before 2026-12-31, and electing it forfeits free-zone 0% benefits. Must be actively elected.
- **DMTT 15%** from 2025 for multinational groups with €750M+ revenue (Pillar Two).
- **No personal income tax. No capital gains tax on individuals. No withholding tax.**
- VAT: 5%. Registration mandatory above AED 375k turnover.
- Economic Substance Regulations (ESR): reporting **abolished for financial years after 2022** (Cabinet Decision 98/2024) — substance now policed through the corporate tax regime instead. Verify current state.

## Setup & maintenance
- Free zone setup: ~1–2 weeks, ~AED 12–50k/yr depending on zone and visas (license + flexi-desk minimum). DIFC/ADGM significantly more expensive (USD 8–20k+/yr).
- Corporate tax registration mandatory even at 0%; annual CT return required.
- Audit: required in most free zones (DIFC, ADGM, DMCC yes; some cheap zones exempt small cos).
- Renewal is annual and license lapses hurt — treat renewals as hard deadlines.

## Residency & visas
- Company license → founder/employee residence visas (2 yr, renewable). Golden Visa (10 yr) for entrepreneurs/investors meeting thresholds.
- No minimum stay to keep company alive, but tax residency (183 days, or 90 with ties) is what gives founders the 0% personal tax benefit. **A founder living elsewhere is still taxed by their home country** — the UAE entity doesn't shield them.

## Banking
- **The pain point.** Corporate account opening takes 2–24 weeks, heavy KYC, some cheap-zone companies get rejected outright. DIFC/ADGM entities and mainland companies with real substance fare better. Budget for this delay; digital banks (Wio, Mashreq NeoBiz) have improved it.

## Compliance & regulatory
- Federal + emirate + zone-level rules. DIFC and ADGM have their own data protection laws (GDPR-like); federal PDPL applies elsewhere.
- Financial services: DFSA (DIFC) / FSRA (ADGM) licensing — credible regulators, used for crypto (VARA in Dubai for non-DIFC crypto).
- AML/KYC obligations broad post-FATF-grey-list exit (2024).

## Grants & incentives
- Not a grant jurisdiction; the incentive **is** the tax regime.
- Accelerators/funds: Hub71 (Abu Dhabi — subsidized housing/office + capital), Dubai Future District Fund, DIFC Innovation Hub subsidized licenses (~$1.5k/yr).

## Best for
- Founders relocating to UAE who bill international clients (0–9% corp, 0% personal).
- Holding companies for MENA operations; crypto/web3 (VARA/ADGM clarity); trading/re-export.
- Financial services targeting Gulf capital (DIFC/ADGM).

## Negative cases
- US-VC-backed startups: VCs won't invest into a free-zone entity; you'd flip to Delaware anyway.
- Founders staying tax-resident in India/UK/US: no personal tax benefit, and CFC/POEM rules may tax the UAE entity at home.
- Anyone needing fast banking or grant funding.

## Hiring & payroll
- No payroll tax, no social security for expat staff (UAE/GCC nationals: pension contributions ~12.5–15% employer). Salaries paid via WPS (wage protection system) for mainland; most free zones too.
- End-of-service gratuity: ~21 days' basic pay per year served (first 5 yrs), 30 days after — a real accrued liability; DIFC replaced it with a funded DEWS scheme (~5.83–8.33% monthly).
- Visas are employer-sponsored and quota-linked to office space — headcount growth means license/office upgrades.
- Emiratisation: mainland companies with 50+ employees must hit UAE-national hiring quotas (rising ~2%/yr, fines for misses); free zones currently exempt.
- Hiring pool is import-everything: no local income tax makes net-pay offers competitive, but total comp expectations in Dubai are high (housing, schooling).

## Founder personal tax
- 0% personal income tax, 0% capital gains, 0% tax on dividends — **if** you are genuinely UAE tax-resident (183 days, or 90 with home/ties) and have exited your previous residency (UK SRT, India 120/182-day rules, US citizenship-based tax follow you regardless).
- UAE now issues Tax Residency Certificates usable for treaty claims.

## Exit & M&A
- No capital gains tax on share sales at any level — the cleanest exit taxation of the five (for UAE-resident sellers).
- But: exits are rarer and shallower — the acquirer pool for UAE-incorporated startups is thinner, and most global acquirers will require a pre-sale restructure or asset deal. Free-zone share transfers need zone authority approval (days-to-weeks, fees).
- ADGM/DIFC entities are the exception: common-law share transfer mechanics, familiar to international counsel, increasingly accepted directly by acquirers and Gulf sovereign funds.
- IPO path: ADX/DFM listings exist but skew to state-linked entities; startup exits are trade sales or a re-domicile before listing abroad.