More and more people, also from Germany, decide to move to Dubai. In addition to the undeniably better weather, tax considerations often play a decisive role. In Dubai, dividends, profit distributions and other private income are generally excluded from taxation. However, exceptions apply to certain companies.
First principle: Dividends are tax-free in Dubai!
Anyone who invests privately in shares, funds and other capital investments decides with the Arab Emirates for a tax-attractive location. Because Dubai does not levy any income or withholding tax on dividends, as is known from Germany or the USA, among others. Rather, the income “gross equals net” arrives at the shareholder or shareholder.
Generally, there is no private income tax in Dubai. In addition to dividends and other investment income, this also applies to wage and salary payments, profits from the sale of real estate or income from their rental and lease. However, exceptions apply – as in Germany, for example – if the income leaves the private sector and is assigned to a company. So while private landlords do not pay income tax, rental companies have to pay a corporate tax.
What applies to dividends in Dubai also applies to other forms of profit distribution. For example, the distribution of a German GmbH is tax-free under the law of the UAE.
But: a possibly effective limited tax liability according to § 1 (4) EStG must be observed. According to § 49 (1) no. 5 letter a EStG, it applies, among other things, to income from investments in corporations (stocks, GmbH shares) if the company has its registered office or the management in Germany.
Special features: What applies to holdings in business assets?
Since 01. June 2023, there is also a general corporate tax in Dubai and the Arab Emirates. It amounts to 9% of the annual profits measured by the entity in accordance with international IFRS standards. The tax basically affects all companies located in the UAE.
In general, however, only that part of the annual profit is taxed that is above (converted) around EUR 100,000. If the company achieves less than EUR 750,000 annual turnover and at the same time a maximum of EUR 100,000 profit, it is completely exempt from taxation.
Also exempt from corporate tax are companies that carry out one of the following activities:
This article does not replace tax or legal advice in an individual case. Facts, current law, jurisdiction, documentation and implementation remain decisive.