Withholding Tax in UAE is a topic that creates confusion among businesses and investors new to the country. Unlike many global jurisdictions, the UAE has adopted a unique tax framework that supports its reputation as a tax-friendly business environment. This detailed guide explains everything about withholding tax in UAE, its implications, and what companies need to know in 2025.
What is Withholding Tax?
Withholding tax is a form of tax deducted at source, usually applied to payments like dividends, interest, royalties, or technical fees paid to non-residents. In many countries, businesses must deduct a certain percentage as withholding tax before sending payments overseas.
Does Withholding Tax Apply in UAE?
In simple terms: NO, the UAE does not apply withholding tax.
Under the current UAE tax laws, no withholding tax is levied on:
- Dividends
- Interest
- Royalties
- Technical service fees
- Other similar cross-border payments
This tax-free approach supports foreign investment and makes the UAE an attractive destination for global businesses.
Why Does UAE Have No Withholding Tax?
The UAE government aims to encourage:
- Foreign Direct Investment (FDI)
- International trade
- Cross-border business expansion
By keeping the UAE free from withholding tax, the country strengthens its position as a global financial hub.
Is There Any Exception for Withholding Tax in UAE?
While the general rule is no withholding tax, businesses should monitor:
- Double Taxation Avoidance Agreements (DTAAs)
- Future amendments related to corporate tax laws
Although UAE’s corporate tax regime started in June 2023, it doesn’t introduce withholding tax.
Impact of UAE Corporate Tax Law on Withholding Tax
The UAE Corporate Tax Law (Federal Decree-Law No. 47 of 2022) introduces a 9% corporate tax on business profits above AED 375,000. However, this law does not impose withholding tax on outbound payments.
Benefits of No Withholding Tax in UAE
- 100% repatriation of profits
- No tax deductions on cross-border payments
- Attracts multinational companies and investors
- Strengthens UAE’s position as a global trading hub
Comparison with Withholding Tax in Other Countries
| Country | Withholding Tax on Dividends | Interest | Royalties |
| UAE | 0% | 0% | 0% |
| Saudi Arabia | 5% to 15% | 5% | 15% |
| India | 10% | 10% | 10% |
| UK | 0% / 20% | 20% | 20% |
| USA | 30% | 30% | 30% |
UAE’s Double Taxation Agreements (DTAAs) Explained
While the UAE doesn’t impose withholding tax, it has signed over 135 Double Taxation Avoidance Agreements (DTAAs). These agreements help prevent businesses from being taxed twice on the same income.
Benefits of UAE DTAAs:
- Protection against double taxation
- Reduces or eliminates foreign withholding tax when UAE businesses deal internationally
- Encourages UAE-based companies to expand globally
When Should Businesses Consider Withholding Tax in UAE?
Even though withholding tax doesn’t apply in the UAE:
- Businesses dealing with other countries must check the withholding tax rates applicable in those countries.
- Payments made to UAE entities might be exempt under DTAAs signed by the UAE.
Common Misunderstandings About Withholding Tax in UAE
- Myth: UAE businesses must deduct tax when paying foreign suppliers.
- Fact: No such withholding tax is required.
- Myth: UAE’s corporate tax includes withholding tax.
- Fact: Corporate tax applies to profits, not outbound payments.
Planning Cross-Border Payments from UAE
Businesses making payments abroad should:
- Review the recipient country’s withholding tax rules.
- Check DTAAs for reduced tax rates or exemptions.
- Consult a tax advisor for compliance in the recipient’s jurisdiction.
Will UAE Introduce Withholding Tax in Future?
As of now, the UAE maintains its tax-free outbound payments policy. However:
- UAE continues to align with OECD global tax standards.
- Future amendments in tax policies may introduce changes, but no plans for withholding tax are announced.
UAE Free Zones and Withholding Tax
Whether you operate in:
- Dubai Multi Commodities Centre (DMCC)
- Jebel Ali Free Zone (JAFZA)
- Abu Dhabi Global Market (ADGM)
- RAKEZ Free Zone
No Free Zone imposes withholding tax on cross-border payments.
Practical Tips for Businesses in UAE
- Ensure compliance with corporate tax filing requirements.
- Use UAE’s DTAA network to reduce tax exposure abroad.
- Keep clear documentation of payments to foreign entities.
- Work with professional tax consultants in UAE to avoid cross-border tax issues.
Conclusion
To summarize, withholding tax in UAE does not exist. Whether you’re a local business or a multinational company operating in the UAE, you can send payments overseas without deducting tax at source. This benefit, combined with no restrictions on profit repatriation, makes the UAE one of the most business-friendly jurisdictions globally.
If your business deals with international clients or suppliers, understanding withholding tax rules in other countries and utilizing UAE’s DTAAs can help you avoid unnecessary tax burdens.
For the latest updates and full compliance, it’s wise to consult experienced tax advisors or business setup consultants in UAE.
FAQs
Does the UAE impose withholding tax?
No. The UAE does not levy any withholding tax on outbound payments.
Do UAE Free Zones apply withholding tax?
No. Free Zones in UAE do not impose withholding tax either.
Are there any exceptions?
No. The current UAE tax framework does not apply withholding tax on dividends, interest, royalties, or other payments.
What is the corporate tax rate in UAE?
The UAE applies a 9% corporate tax on profits exceeding AED 375,000.
Should UAE companies deduct tax when paying overseas suppliers?
No. UAE companies do not deduct withholding tax when making foreign payments.
How do DTAAs help UAE businesses?
UAE’s DTAAs prevent double taxation and reduce withholding tax in other countries when UAE businesses receive payments.
Can the UAE introduce withholding tax in future?
Currently, there is no plan to introduce withholding tax in UAE.
Do banks in UAE deduct withholding tax on international payments?
No. Banks in UAE transfer payments internationally without deducting any withholding tax.
Do freelancers in UAE pay withholding tax?
No. Whether you’re a company or freelancer, no withholding tax applies in UAE.
Who should I consult for tax planning in UAE?
You should consult professional tax consultants or corporate tax advisors in UAE for personalized guidance.
