Top Reasons Why the UAE Is the Highest Preferred Country for Holding Company Structure
Transformation of the UAE from being an oil-dependent economy has now become recognised globally and has become an investment hub for several investors as it offers a favourable place for growth, expansion and security.
With so many attractions, the UAE has become one of the highest-rated places for setting up holding companies. Seen growing operations within the UAE as well as abroad, forming subsidiaries.
Let us know in this blog why, among all countries, the UAE has become the preferred destination for setting up Holding companies. Rather than being in the UAE or across the globe
What holding companies are all about, let's discuss
It is a legal entity that owns shares or assets in other companies. Holding companies produce goods or services or sell them. Their main work is managing the business units' real estate and intellectual properties.
The main reasons why the UAE is a preferred country for holding companies
1. Strategic Location as a Global Gateway
UAE is a natural bridge between countries like Europe, Asia, and Africa, between east and west Its Due to this connectivity, it has been a hub for investors to come and invest in the country.
The benefit of having a holding company in the UAE is that the coordination between branches, subsidiaries and joint ventures are done efficiently across the world.
2. Corporate tax applicability for a qualifying free zone for a holding company is 0%
As the UAE has introduced 9% corporate tax but many free zones get the benefit of 0% corporate tax for holding companies if they meet the criteria to be a qualifying free zone person as per the UAE TAX Law.
- Income earned from dividend capital gains can be from foreign entities or local entities.
- income should not be from the main mainland entity unless limited and a properly structured is maintained
All income generated from foreign sources i.e. dividends from overseas subsidiaries usually not liable to pay tax when it is held by a proper holding company in the UAE
3. NO withholding tax on dividends and royalties.
There is no withholding tax imposed on
- Dividends which are paid to foreign shareholders
- Any interest paid on royalties
It makes UAE foreign subsidiaries easier, beneficial and tax-effective for investors in terms of profit.
4. Ownership allowed 100% to foreign owners
Many countries do not allow 100% ownership to foreign investors, but the UAE allows 100% ownership to foreign investors.
This benefits the foreign owner to structure their own company without any involvement of local sponsors or nominees.
5. Double taxation avoidance agreement
Over 140 Double taxation avoidance agreements the UAE has signed with countries all over the world. These treaties benefit from double
taxation on income and provide the following:-
- Any dividends, interest, and royalties have a zero withholding tax rate.
- Relief from foreign tax credits
- UAE holding entities have legal certainty on tax residency status
This benefits all the holding company in UAE that has foreign subsidiaries in treaty partner countries.
6. Participation exemption for corporate tax
Participation exemption under the UAE corporate tax law
* All the dividends and capital gains that are earned from domestic or foreign subsidiaries can be exempt from tax if:
- 5% ownership should be of a UAE company
- 9% Corporate tax will be paid to the investee
- 12-month shares are held
This structure is more attractive for international investment holding purposes.
7. Asset protection and legal security
Assets are protected as the UAE has a strong, stable, neutral and legal environment and property rights. Additionally, the framework is modern commercial laws, and in certain free zones, they have a confidentiality framework.
Low risk is involved for holding real estate assets or intellectual properties in the UAE held by UAE holding companies.
Free zones have their common law frameworks that has offered international standard dispute resolution.
8. Profit repatriation is made easy
All profits, any capital or dividends can easily be transferred out of the UAE. No control over foreign exchange currency restriction, and no repatriation restrictions exist
This is more profitable and beneficial for foreign investors. Which helps foreign investors to manage funds and cash flow across borders
9. Global and economic substance reputation
To boost its global reputation, the UAE has introduced ESR, Anti-Money Laundering aligned with the OECD.
- Income derived from passive income in a holding company usually has minimal ESR obligations.
- All over, global financial institutions and governments have accepted and respected the level of international compliance made by the UAE holding structure.
10. Multiple asset holding structure
As a UAE holding, they can own:
- Operating subsidiaries UAE and internationally based
- Real estate
- Trade marks and I P
- Investment portfolios
- Bank accounts
- Vehicles, including aircraft, yachts
To reduce ring-fence risk, it is better to create an SPV or a sub-holding under one parent holding.
Which free zones are best in terms of setting up holding companies
Below are the most effective free zones
| Free Zone | Key Benefit |
|---|---|
| ADGM (Abu Dhabi) | Common Law, SPVs, and global recognition |
| DIFC (Dubai) | Financial hub, common law, fund structuring |
| DMCC | Cost-effective, access to 0% Corporate Tax |
| RAKEZ | Low-cost, suitable for regional holdings |
| SHAMS / IFZA | Simplified holding setups for SMEs |
How Flying Colour Tax Consultant LLC Can Help
At Flying Colour Tax Consultant LLC, we help entrepreneurs, investors, and multinational businesses:
- Identify the right Free Zone for their goals
- Structure holding companies to tax efficiently
- Comply with ESR, Corporate Tax, and UBO regulations
- Facilitate bank account opening and subsidiary setup
- Ensure DTAA optimisation and participation exemption benefits
Conclusion
If you are an investor or a regional business with multiple entities to set up a holding company in the UAE offers unmatched flexibility advantages in TAX and other legal aspects.
The UAE has zero tax on passive income it easy to do business and making the UAE a global hub for holding companies. Also, to protect assets.
To learn more about Why the UAE is the Highest Preferred Country for Holding Company Structure?, book a free consultation with one of the Flyingcolour team advisors.
Disclaimer: The information provided in this blog is based on our understanding of current tax laws and regulations. It is intended for general informational purposes only and does not constitute professional tax advice, consultation, or representation. The author and publisher are not responsible for any errors or omissions, or for any actions taken based on the information contained in this blog.