Dividends from a UAE company: tax, audit and how to take the profit out
The UAE company has made money, the cash sits in the corporate account, and the owner wants to take it out. The usual question is "how much tax do I pay on dividends in the UAE", and the answer "none" is only half right. The UAE withholding tax rate is currently 0%, so nothing is withheld on payment. But dividends cannot be paid out of just any money in the account: first the profit available for distribution is determined — under the law, the articles, the financial statements and any statutory reserves. And if the recipient is tax resident elsewhere, tax may arise there. Below is the whole chain, step by step.
- UAE withholding tax
- 0%
- Paid out of
- profit available for distribution
- Decided by
- shareholders, as the articles provide
- Russian tax resident
- personal income tax 13% or 15%
UAE taxes: what there is and what there is not
The UAE does have a withholding tax regime, but its rate is currently 0%. So nothing is withheld when dividends are paid, including to foreign shareholders. There is no personal income tax either, so a shareholder who is UAE tax resident receives dividends entirely tax-free.
A 0% withholding tax does not remove Corporate Tax at company level. Taxable Income is taxed at 0% up to AED 375,000 and 9% on the part above, and paying dividends is not a deductible expense — it does not reduce Taxable Income. How the tax itself is calculated is covered in our Corporate Tax guide.
| Who receives the dividends | UAE tax |
|---|---|
| Individual, UAE tax resident | none |
| Individual, not UAE tax resident | nothing withheld (0% rate); tax may arise in the country of residence |
| UAE company, from another UAE company | exempt from Corporate Tax |
| UAE company, from a foreign company | may be exempt if the participation exemption conditions are met |
The participation exemption for foreign dividends does not come down to one or two numbers. The key condition is a participating interest, usually 5% or more, together with requirements on the holding period, the subsidiary's own taxation and the other conditions of the regime. Holding 5% for 12 months does not by itself guarantee the exemption — holding structures deserve a separate check.
Paid out of profit, not out of the bank balance
Money in the corporate account and profit available for distribution are different things. The balance may include client advances, cash set aside for liabilities and payroll, refundable deposits — none of which is profit. Before any payout the company determines its profit available for distribution under the law, the articles, the financial statements and any statutory reserves.
For mainland LLCs the rules come from the Commercial Companies Law (Federal Decree-Law No. 32 of 2021):
- the decision to distribute profit is taken by the general assembly of partners;
- each year 5% of net profit goes to a statutory reserve until the reserve reaches 50% of share capital — that part cannot be distributed;
- how profit is split is governed by the law, the articles and the assembly's resolution.
For free zone companies, check the applicable free zone regulations, the MOA/AOA and the corporate procedures separately. And remember the tax side: Corporate Tax applies to free zone companies too. Being in a free zone does not in itself mean a 0% rate — 0% applies to the Qualifying Income of a Qualifying Free Zone Person that meets the conditions.
Interim dividends — carefully. Whether and how part of the profit can be paid before year-end depends on the company's legal form, the law and the articles. Before paying, confirm that there is enough profit available for distribution. If the year closes with a loss, what was paid may turn out to be a distribution of profit that never existed — raising questions from both the bank and the auditor.
Is an audit needed to pay dividends?
There is no universal requirement in the UAE to carry out an audit specifically before paying dividends. But the obligation to have audited financial statements can arise on other grounds — and then the audited accounts become the basis for the payout:
| Source of the requirement | Who it affects |
|---|---|
| Commercial Companies Law | A mainland LLC must have one or more auditors, appointed annually by the general assembly of partners |
| Corporate Tax | Audited financial statements are required for revenue above AED 50 million (for taxable persons outside a Tax Group) and for every Qualifying Free Zone Person regardless of revenue. Tax Groups have separate requirements |
| Free zone and bank rules | Many free zones require audited accounts at licence renewal, and banks may ask for them on large transfers to shareholders |
Even where an audit is not mandatory, the bank may ask for documents supporting the basis of a large payment to the owner. Annual accounts and the shareholder resolution answer those questions before they are asked. When an audit is mandatory and how to prepare — in our guide to audit in the UAE.
How to pay dividends: step by step
- Close the period in the books and prepare financial statements. Determine the accounting profit and the profit available for distribution.
- Have the accounts audited if the company must, or if the free zone or bank expects it.
- Determine the amount to distribute, taking into account Corporate Tax, the statutory reserve, the law, the articles and any other requirements.
- Pass a shareholder resolution: amount, period, split, payment date.
- Record the liability to shareholders for dividends payable.
- Transfer the approved amount to the recipient in line with the resolution and the bank's requirements, keeping the basis of the payment on file.
- Keep the file: accounts, resolution, payment records. The bank, the auditor and — if the recipient is resident elsewhere — the tax authority there will ask for it.
Salary to the director or dividends
An owner who works in their own company can be paid in two ways, with different tax consequences.
| Remuneration | Dividends | |
|---|---|---|
| Reduces Corporate Tax | yes, if at market level | no |
| Employer obligations | depend on the director's status and relationship with the company | none |
| Frequency | can be paid regularly | under the profit distribution rules and a shareholder resolution |
For Corporate Tax purposes, remuneration to a related party, owners included, must follow the arm's length principle. Inflating it purely to reduce Corporate Tax can lead to adjustments. Whether a director must be paid through WPS depends on their status and the nature of the employment relationship — see our guide to WPS rules.
If the recipient is a Russian tax resident
For many owners of UAE companies this is the main part of the question. A Russian tax resident is subject to personal income tax on income from any country, including UAE dividends, taking the double tax treaty into account.
- Personal income tax rate — a separate scale for dividends: 13% on the part up to RUB 2.4 million a year and 15% on the part above. The dividend tax base is calculated separately from other income.
- Usually nobody withholds it: a UAE company is not a Russian tax agent. The resident then files a 3-NDFL return by 30 April of the year after receipt and pays the tax by 15 July.
- There is nothing to credit: since no UAE withholding tax was actually deducted, there is no foreign tax to offset in Russia. A 0% rate does not by itself create a Russian tax credit, so the Russian tax is paid in full.
From 1 January 2026 the double tax treaty between Russia and the UAE applies. Its provisions are taken into account together with Russian tax law when dividends are paid. But because the UAE withholding tax rate is 0%, in the ordinary case there is still nothing to credit in Russia.
CFC rules are a separate topic. If a Russian resident holds more than 25% of a UAE company (or more than 10% where Russian residents together hold more than 50%), it is their controlled foreign company. The tax office must then be notified, and its undistributed profit may be taxed in Russia even without a dividend, unless an exemption applies.
The effective-tax-rate exemption is not available in practice for a UAE company: the effective rate must be at least 75% of the Russian weighted average corporate profit tax rate — at today's 25%, that is 18.75%. The UAE's 9% falls short, and 0% even more so. For operating companies there is a more realistic route — active foreign company status. It depends not on the tax rate but on the nature of income: passive income (dividends, interest, royalties and the like) must be no more than 20% of the company's total income.
Earlier still, at a holding above 10%, there is a separate obligation — to notify the Russian tax office of the participation itself within three months, regardless of CFC status. The ownership structure and notifications are worth reviewing with a Russian tax adviser right after the UAE company is set up.
Common mistakes
- Taking out "the bank balance" without determining the profit available for distribution. The cash in the corporate account does not in itself set the dividend amount.
- Confusing dividends with the Corporate Tax calculation. Corporate Tax is calculated on Taxable Income, and paying dividends does not reduce it.
- No shareholder resolution. A payment to the owner needs a proper corporate and accounting basis.
- Forgetting the statutory reserve of a mainland LLC and distributing the entire profit.
- A Russian resident not declaring the dividends because "there is no tax in the UAE". Where there is an obligation to declare, the 3-NDFL return must be filed and the tax paid on time — otherwise penalties and interest are added.
