Dub(ai) be good to me?

Andy Wood • April 22, 2024
An aerial view of a city skyline with a beach in the foreground.

Some time ago I wrote a rather bilious article after viewing a video post by a ‘tax influencer’ (should that be effluencer?) shilling the tax benefits of Dubai (UAE).


In short, move here and pay no tax on your personal and business income. It wasn’t a great take. However, it is also not a unique one.

That’s not to say I don’t like Dubai or the UAE, of course. I live here. 

I love the sun. I feel I should have been born in a different company. A unique form of body dysmorphia perhaps?

Further, and more seriously, the UAE is bursting with business opportunities and the ambition of the region is as remarkable as it is refreshing.

As such, the attractions for setting up one’s business and life over there are not lost on me.

But does our fresh-faced influencer have a point or not?


Getting serious


Of course, historically, the UAE has had an exceedingly light touch (we’re talking helium, here) to taxation. 

However, as we will see, this recently shifted for corporate taxes and did so in most of the gulf states for VAT a number of years ago.

So, can we move seamlessly, fiscally speaking, from the UK to the UAE?

Things tend to relatively simple where one is upping sticks and moving to the UAE.

Say, breaking UK residency and taking up residency in the UAE.


But what about where the entrepreneur is not able, or willing, to leave the UK from a residence perspective?

Well, this is where the position is trickier. 

In that case, one cannot simply remain in the UK and offshore one’s activities to a new company in the UAE without some substantial tax issues. 

Depending on the circumstances – these may or may not be manageable.

However, our influencer, who thinks the UK’s Transfer of Assets Abroad (TAA) provisions are simply a cryptic crossword description of suitcase, has not missed a beat.


Corporate taxes


I will start with corporate taxes, as this is perhaps where – from the UAE perspective – the biggest change has been.


UK corporation tax


Assume that our intrepid entrepreneur has:


  • set up a new company in the UAE (Dubai);
  • and has appointed directors in that jurisdiction such that it is ‘managed and controlled’ from the UAE 


Here, the company should not be resident for tax purposes in the UK. However, a UAE company could still have a UK taxable presence where it has a UK trade or where it has a UK Permanent Establishment. (“PE”) The Company might have a UK PE where is has a UK sales office, for example. It should be noted that the fact that the Company has UK customers is largely irrelevant. However, clearly, at the other end of the spectrum, where the client base is almost wholly non-UK, then the chances of creating taxable touch points in the UK is less likely. Further, for corporation tax matters, unless it can be argued he or she is managing and controlling the company from the UK, the location of the individual shareholder does not really matter.

However, if the shareholder remains UK resident, then this will cause issue with a key set of anti-avoidance provisions, the aforementioned TAA provisions, that we will discuss this below.


UAE corporate tax


Up until 1 June 2023, the UAE levied no tax on the direct profits of individuals or companies. 

However, following the enactment of a new corporate income tax law, taxable persons are likely to be subject to tax on business profits.

As one would expect for a ‘corporate income tax’ UAE companies and other non-natural persons (referred to simply as Companies for the rest of this article) that are incorporated or effectively managed and controlled in the UAE are potentially subject to the tax/

In addition, Non-resident Companies that have a Permanent Establishment (think branch) in the UAE are within its scope.

Perhaps more surprisingly is that natural persons (including individuals) who conduct a Business or Business Activity in the UAE are also within its scope. Companies established in a UAE Free Zone are also within the scope of Corporate Tax as “Taxable Persons”.

However, there is an all-important qualification around so-called Qualifying Free Zone Persons. These persons pay 0% on their Qualifying Income, which is a narrowly defined category.. Broadly, the exposure to UAE corporate tax is as follows:


  • Resident Persons: taxable on income derived from both domestic and foreign sources
  • Non-Resident Persons: taxed only on income derived from sources within the UAE 


The headline rate of corporate tax is 9%, which applies to 

Taxable Income exceeding AED 375,000. Below this threshold, the rate of tax is 0%

One important feature of the regime is a relief called Small Business Relief. This valuable relief might apply where revenue is no more than AED 3m. Where an election is made for SBR then the Taxable Person is deemed to have no income at all – and therefore has no tax to pay. 

Not too shabby.


Personal taxes


Perhaps somewhat counter-intuitively, it can be the personal tax rules, and the personal tax anti-avoidance rules in particular, that make or break such an exercise.


Leaving the UK (for UAE?)


As stated above, whether our entrepreneurial friend is leaving the UK or not will be the seminal question here.

Of course, when I say ‘leaving the UK’, I mean becoming non-UK resident for tax purposes. I haven’t got the space to discuss the Statutory Residence Test here. However, here’s one we prepared earlier! [Draft and link] 

Where the shareholder in the new company is going to be non-UK resident, we do not have to worry about the anti-avoidance provisions listed below. In addition, if the individual is non-UK resident, then any dividends paid by the new UAE company will be free of UK tax.

One needs to be mindful of the 5-year temporary non-residence rule here. 

However, if the profits of the Company arise after breaking UK residence, then this should not be an issue even if the individual returns within the 5 year window. The position is much more perilous where the individual remains in the UK, however…


UK anti-avoidance


If the shareholder remains UK resident, then we have to run the gauntlet of the TAA rules.

These rules have been on the statute for many decades but are over-looked by those who think that ‘doing a Google’ is as easy as the press want us to think. These rules bite where, in the context of a company, assets are transferred to a non-UK company to avoid tax and they produce non-UK income. Under basic principles, the Company may escape corporation tax for the reasons set out above.

However, the rules put an end to this relatively simple wheeze by allowing HMRC to essentially look through the entity and assess the individual shareholder on the profits. There are two relevant defences to these rules. Firstly, where the non-UK entity is established broadly for commercial purposes. Also, there is a statutory EU defence if the Company is resident in an EU member state (clearly not relevant for the UAE!) and, for obvious reasons (the B word), the standing of this defence is a little uncertain.


Local personal taxes in the UAE?


At present, there is no personal income tax in the UAE.


Value added tax


VAT was also introduced in the UAE relatively recently. The standard rate is 5%.


Conclusion


So, there we have it.


As with any tax planning, it all boils down to the personal and commercial objectives of the individual.

In fact, some might say it’s all in the ‘Tank fly boss walk jam nitty-gritty’.

Something that is difficult to distil into a Tik Tok video.


If you require further information on UK tax advice for expats or any other tax planning advice then please get in touch

BREAKING NEWS: UAE Offers Corporate Tax Penalty Relief – But You Must Act Fast to Qualify

By Amie Roberts • May 1, 2025
If you’ve missed your Corporate Tax registration deadline or already paid the AED 10,000 fine, there’s now a golden opportunity to waive or reclaim that penalty — but only if you act quickly. In a recent move to support businesses during the first year of the UAE’s Corporate Tax rollout, the Federal Tax Authority (FTA) has announced a limited-time grace period. The initiative allows eligible businesses to apply for a full penalty waiver if they file their Corporate Tax return early. This is a major relief for thousands of companies who have either: Missed their Corporate Tax registration deadline, or Registered late and were hit with the AED 10,000 fine Why is this happening? According to Gulf News, this initiative is part of a broader effort by the Ministry of Finance and the FTA to ease the transition into the new Corporate Tax system and promote long-term compliance. What You Need to Know: Deadline for the waiver: July 31, 2025 BUT: You must file your return well ahead of your official tax deadline to qualify. Don’t wait – gathering your financial records and preparing your tax return can take time. For most businesses operating on a calendar year basis (Jan–Dec), that means filing within the next couple of months. Who qualifies for the penalty waiver? If you’re asking: “Can I get a refund on my Corporate Tax late registration fine in the UAE?” “Is it possible to waive the AED 10,000 Corporate Tax penalty?” “How do I apply for the UAE Corporate Tax penalty relief?” Then the answer is – yes, you may be eligible. But there’s a catch: you must file your tax return early, ahead of your normal deadline. This is not automatic, and if you miss the window, the fine will not be waived or refunded. Why early filing matters: The FTA has made it clear: early compliance is the only route to relief. This means: Completing your Corporate Tax registration (if not already done) Preparing your financials for your first tax year Submitting your Corporate Tax return well before the deadline This one-time waiver won’t be repeated – so don’t leave it until the last minute. How Mosaic Chambers Group can help: At Mosaic Chambers Group, our FTA-certified tax advisors and legal consultants are ready to guide you through the entire process. Whether you need help: Understanding your eligibility Filing your Corporate Tax return early Claiming your AED 10,000 fine refund Or ensuring future tax compliance We’re here to take the stress out of Corporate Tax. Book a free consultation today and get expert support from our team. Click here to get in touch or below to book your call.

End of the Non-Dom Era: Labour’s Tax Reform Triggers Wealth Flight

April 15, 2025
April 6th, 2025 marks the beginning of a major shift in UK taxation. Labour’s new tax reforms have officially scrapped the long-standing non-domiciled (non-dom) tax status — a move that targets wealthy individuals who live in the UK but, under the new non dom regime, have been able to mitigate UK tax on their overseas income and gains. This change spells the end of a tax break that attracted many high-net-worth individuals (HNWIs) to the UK and is already causing ripples across the country’s elite financial circles. The message is clear: if you live here, you pay here. Let's break down what has changed. What Was the Non-Dom Tax Regime? The non-dom tax regime allowed individuals residing in the UK, who claimed their primary home (domicile) to be outside the UK, to avoid UK income and capital gains taxes by not bringing any foreign earnings or gains back into the UK. This system made the UK an attractive location for individuals with international earnings. We covered this in more detail here. What Has Changed? Since 2025-26 tax year, the government has implemented several significant reforms. These reforms include: 1. End of Non-Dom Status All UK tax residents will now owe UK income tax on all global income and gains, regardless of whether these were brought into the country or not. 2. Inheritance Tax (IHT) on Foreign Assets Non-doms could previously avoid UK Inheritance Tax on assets they held outside the UK; now individuals who have lived here for more than four years will be liable for IHT on all their global estate assets. 3. Temporary Reliefs To assist the transition, temporary measures include the following: Tax Year 2025-26 will see a 50% reduction on foreign income tax. Capital Gains Tax (CGT) laws allow us to rebase overseas assets based on their value as of April 2019 for CGT purposes. Temporarily, bringing money from abroad may not incur full tax charges upon entering the UK. Why Has the Government Made These Changes? According to Labour, eliminating non-dom status will provide many advantages: Enhance tax fairness Raise extra funds to support public services Close longstanding loopholes used by the wealthy Rising Tax Bills HNWIs with overseas assets and income will now face significantly increased tax obligations that may have an effect on personal finances, family planning and wealth transference. Making Decisions About Moving Abroad Some individuals are already leaving the UK in order to settle in countries with more advantageous tax regimes. Some common destinations for relocation include: United Arab Emirates (UAE) does not levy income or capital gains tax Switzerland provides fixed annual tax arrangements for its most wealthy citizens Italy - flat tax of EUR100,000.000 on foreign income for new residents Monaco does not levy personal income tax for residents Concerns Raised About Impact Within Industry Concerns are being expressed that this could lead to a decrease in: Investment into UK businesses Jobs funded by private wealth Donations to UK Charities What About Entrepreneurs? Many entrepreneurs utilise non-dom status to reduce tax on international business earnings, however, these changes could require: Establishing headquarters or structures outside the UK Reconsider ownership of intellectual property or company shares An investigation of how profits and dividends are managed is important to ensure long-term growth. What Should Be Done Now? If you or those you work with have been affected, taking immediate steps is key to their safety. Here are a few things you can do. 1. Consult With A Specialist Tax Advisor Every situation varies. Seek tailored guidance from someone familiar with both UK and international tax regulations. 2. Evaluate Your Financial Structures Evaluate how you hold assets - for instance through offshore companies or trusts. Any necessary changes must be implemented for optimal efficiency and compliance purposes. 3. Consider Relocating If the UK's new tax rules no longer suit, you might wish to explore living elsewhere where tax liabilities would be lower. Be sure to carefully consider all legal, financial, and family aspects prior to making any decisions. Summary The changes to the non-dom tax regime mark a profound transformation for those who rely on global income and wealth for tax payments, especially those living abroad. Although intended to increase fairness, these reforms also pose challenges to those accustomed to using it. Now is the time to review your plans, secure your assets, and seek professional guidance. How Can We Assist? At our offices in both the UK and UAE, we assist individuals, entrepreneurs and professional advisors in making well-informed decisions. If you have any queries about this article or need advice then get in touch.
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