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Running a profitable UAE business, which is generating steady income while living in the UK can turn into a maze of tax complications. For a lot of UAE workers not living in the country, the question of their tax liabilities is an important one. What happens when HMRC discovers payments being received from a UAE entity? Will your income be taxed twice?
With over 35,000 British nationals holding UAE residence visas and many more owning UAE companies while remaining connected to the UK. The confusion around UAE tax for expats is real and getting it wrong could mean a surprise tax bill, penalties, or both.
This guide explains how UAE income tax for foreigners works when living abroad, what your home country expects, and the compliant ways to extract income from your UAE company.
Since 1 June 2023, the UAE has implemented federal corporate tax under Federal Decree-Law No. 47 of 2022. Companies earning above AED 375,000 annually now pay 9% corporate tax on profits exceeding that threshold. Earnings below AED 375,000 remain at 0%.
The UAE still maintains 0% personal income tax on individuals. Whether receiving salary, dividends, or other income, individuals pay zero tax on personal earnings locally. This applies to both UAE residents and non-residents receiving income from UAE companies.
All UAE companies must register with the Federal Tax Authority through the EmaraTax platform and file corporate tax returns within nine months of their financial year-end. For companies with a 31 December year-end, the filing deadline is 30 September annually.
The company’s location and your personal income tax residency are separate matters. Understanding UAE tax for expats means understanding both sides of the equation. The UAE might not tax your personal income, but your home country almost certainly will if you’re resident there.
For UK residents, HMRC operates a worldwide income tax system. If you’re a UK tax resident, you must pay UK tax on your global earnings regardless of where the money originates. The Statutory Residence Test determines your UK tax status based on days spent in the UK and other connections
Spending 183 days or more in the UK during a tax year (6 April to 5 April) automatically makes you UK resident for tax purposes.
UK residents receiving income from the UAE companies must report it through Self-Assessment using Form SA100 with the SA106 Foreign supplement.
Salary payments from UAE company count as foreign employment income. UK residents pay UK income tax at 20%, 40%, or 45% depending on total earnings.
Dividend income faces UK foreign dividend tax. For the 2024/25 tax year, the dividend allowance dropped to just £500, meaning nearly all dividend income is now taxable at:
The UK-UAE Double Taxation Agreement prevents income from being taxed twice on identical amounts. Individual won’t pay both UAE corporate tax and UK personal tax on the same profit.
The method chosen to extract income affects both your UAE corporate tax bill and your personal tax liability in your country of residence.
1. Paying yourself a salary
Salaries are deductible expenses for your UAE company, reducing its taxable profit. If your company earns AED 600,000 and you pay yourself AED 300,000 in salary, the company only pays 9% UAE corporate tax on AED 225,000.
For UK residents, this salary gets taxed as foreign employment income with UK income tax applied at marginal rate. For UAE residents, salaries remain completely tax free. The UAE does not levy personal income tax on wages from employment.
2. Taking dividends from profits
Dividends are distributions after tax profits. UAE company pays 9% corporate tax first, then you receive dividends from what remains. The UAE charges no withholding tax on dividends paid to foreign shareholders.
UK residents must pay UK dividend tax after the minimal £500 allowance. If you’re a higher rate taxpayer taking £50,000 in dividends, you’ll pay 33.75% on £49,500, equalling approximately £16,706 in UK tax.
UAE residents receive dividends completely tax-free. The choice between salary and dividends often makes little difference for UK residents since you’re paying UK tax either way.
HMRC uses Controlled Foreign Company rules to prevent UK residents from parking profits in foreign companies that pay low overseas tax.
If a UK resident owns more than 25% of a foreign company that pays low overseas tax, HMRC can attribute the company’s undistributed profits to the individual personally and charge UK corporation tax at 25%.
Several exemptions protect legitimate trading businesses including low profits exemption (under £50,000), high tax exemption, and trading exemption for genuine businesses with proper substance.
With UAE corporate tax at 9%, the trading exemption usually protects active businesses. The major risk appears when managing UAE companies entirely from the UK. If all strategic decisions happen from UK homes, HMRC might argue the company is really UK resident through “management and control,” triggering 25% UK corporation tax.
To avoid issues, ensure UAE companies have genuine substance, real offices, local employees making decisions, and board meetings held in the UAE.
The UAE Federal Tax Authority requires all companies to comply with corporate tax rules, regardless of where shareholders live. Non-compliance triggers penalties starting at 14% monthly on outstanding amounts.
All UAE legal entities must register for corporate tax through the EmaraTax platform, even if earning below the taxable threshold. Corporate tax returns must be submitted within nine months of financial year-end. Late filing incurs an AED 10,000 penalty.
Companies must maintain comprehensive financial records including contracts, invoices, bank statements, and proof of business substance. The FTA can request these during audits at any time.
A UAE Tax Residency Certificate verifies your company’s UAE tax position and allows you to benefit from double taxation agreements with your home jurisdiction. Fees range from AED 500 to AED 1,750 based on your FTA registration.
Eligibility requires the company to be incorporated in the UAE for a minimum of 12 months, hold audited financials, and demonstrate active UAE operations such as an office lease and business activity records. Applications are handled through EmaraTax and usually take 5-10 working days to process.
1. UK Resident who owns a Dubai Free Zone Company
Someone lives in the UK but owns a business in a Dubai Free Zone.
The owner takes AED 400,000 as dividends.
Because they live in the UK, the UK taxes the dividends.
Total tax they pay (Dubai + UK) is about £31,740.
Effective tax rate: about 25-26%.
2. UAE Resident who visits the UK often
Someone lives in Dubai full-time and only visits the UK for short trips.
Because they stay more than 183 days in the UAE, they are a UAE tax resident.
They stay less than 183 days in the UK and do not have strong UK connections, so they are not a UK resident.
They pay no UK tax because they are not a UK tax resident.
Total tax they pay, only the UAE corporate tax (about £9,660).
3. Complications when someone moves between the UK and UAE mid-year
Someone moves from the UK to Dubai in October 2024 and considers returning to the UK in March 2025. This creates a problem:
Unless they qualify for split-year treatment, the UK can tax all their UAE income, even the money earned while living in Dubai.
So, if they return to the UK too early (before completing a full UK tax year abroad), they may still owe UK tax on all income from Dubai.
1. For those living in the UK
UK residents must accept they’ll pay UK tax on income from UAE companies. Registration for Self-Assessment with HMRC is necessary if not already done. All UAE income must be reported on Form SA100 with SA106 Foreign supplement by 31 January following the tax year.
Maintaining detailed records of time spent in the UK is essential. HMRC cross-checks this information with UK border data. Ensuring UAE companies have genuine substance beyond just registered addresses is crucial. Real offices, local employees, and UAE-based decision-making protect against HMRC arguing the company is really UK resident.
Consideration between salary or dividends depends on individual situations. The tax difference is often minimal, but salary reduces UAE corporate tax by lowering taxable profits. Claiming double taxation relief where applicable is important.
2. For those wanting to avoid UK Tax entirely
Breaking UK tax residency properly means spending under 16 days annually in the UK if previously UK resident. Establishing genuine UAE residence requires spending over 183 days annually in the UAE, obtaining a UAE residence visa, and renting accommodation there.
Moving the company’s “place of effective management” to the UAE is essential. Board meetings, strategic decisions, and contract signing should occur in the UAE. Obtaining a UAE Tax Residency Certificate proves status to HMRC. Filing form P85 with HMRC when leaving the UK informs them of departure.
Staying abroad for at least one complete UK tax year (6 April to 5 April) before taking large dividends is advisable. If someone was UK resident for at least four of the seven years before leaving and returns within five years, temporary non-residence rules can claw back dividends taken during absence.
The UAE joined the Common Reporting Standard in 2017. UAE banks automatically report account details to countries of tax residence annually. HMRC uses sophisticated data matching to identify undeclared foreign income.
Penalties for non-disclosure range from 15% to 30% of unpaid tax, plus interest. The UK eliminated the remittance basis of taxation from April 2025 for most taxpayers. New arrivals to the UK may qualify as “Qualifying New Arrivals” with a four-year exemption on foreign income kept offshore.
Understanding UAE tax for foreigners when living abroad isn’t optional anymore, it’s essential. In 2024 alone, more than 250,000 corporate tax registrations were completed, and tax authorities worldwide now exchange data automatically under the Common Reporting Standard. As a result, the old belief that offshore income goes unnoticed is over.
HMRC investigations into offshore structures increased by over 40% between 2020 and 2023, with penalties reaching up to 30% of unpaid tax plus interest.
The path forward is straightforward: match residency status with business structure and comply with rules in both countries. For those genuinely living in the UAE, benefiting from 0% personal income tax whilst maintaining proper company substance is possible. For UK residents, reporting everything accurately through Self-Assessment and claiming double taxation relief is necessary.
With 9% corporate tax in the UAE and 140+ double taxation agreements in place, legitimate tax efficiency is entirely achievable when structured correctly.
