If you are making payments to foreign suppliers, consultants or shareholders, you are probably wondering whether withholding tax in the UAE applies to you. With Corporate Tax in force, many business owners are asking whether cross-border payments now attract WHT.
The UAE withholding tax rate is currently 0%.
What is withholding tax?
Withholding tax is a tax deducted at source when you make certain payments, usually to a non-resident. Instead of paying the full amount to the foreign party, you deduct a percentage and pay that portion directly to the tax authority.
For example, if you pay AED 100,000 in royalties to a company abroad and the withholding tax rate is 10%, you would deduct AED 10,000 and remit it to the tax authority. The foreign company receives AED 90,000.
Is there a withholding tax in the UAE?
There is a 0% withholding tax in the UAE according to the Corporate Tax law. This applies to:
1. Dividends paid to foreign shareholders
If your UAE company distributes profits to overseas shareholders, you do not deduct any tax at source. The shareholder receives the full dividend amount.
2. Royalties paid to foreign entities
Payments for intellectual property such as trademarks, patents and licensing fees are not subject to withholding tax under UAE rules.
3. Service fees paid to non-residents
If you pay a consultant or service provider located outside the UAE, you are not required to deduct WHT from that payment.
There is also no separate registration or filing requirement specifically for withholding tax, because the rate is zero.
Withholding tax under Corporate Tax law
Even though the rate is currently 0%, withholding tax is still officially part of the Corporate Tax law. This means the government can change the rate through a Cabinet Decision without rewriting the law, and businesses are already covered under the existing framework. So while no tax is being charged right now, the system is fully in place if the policy changes in future.
Why the UAE rate is 0%
The UAE has adopted a 0% withholding tax rate for the following reasons:
- Attract foreign investment. When you do not deduct tax from dividends or royalties, foreign investors receive higher net returns. This makes the UAE more attractive as a holding and investment destination.
- Support cross-border cash flow. Since you are not withholding any amount, the full payment reaches the foreign recipient. This reduces friction in international business transactions.
- Strengthen the UAE as a global business hub. Many multinational groups use the UAE as their regional headquarters. A zero withholding tax environment simplifies group structuring and profit distribution.
For entrepreneurs setting up in Dubai, it makes the country an attractive place to grow operations.
Withholding tax vs VAT in the UAE
In the UAE, withholding tax and VAT serve different purposes. Payments to foreign consultants fall under withholding tax rules, while selling goods or services locally falls under VAT.
Withholding tax applies to cross-border payments such as dividends, interest and royalties, and is deducted at source from the payment made to a foreign party. The current UAE withholding tax rate is 0%.
VAT, by contrast, applies to goods and services supplied within the UAE and is charged at 5% on invoices, with VAT registration mandatory once taxable turnover exceeds AED 375,000.
Frequently asked questions
Is there withholding tax in the UAE?
The withholding tax rate in the UAE is currently 0% under the Corporate Tax law. No tax is deducted at source on dividends, royalties or service fees paid to non-residents.
Do I need to deduct tax when paying a foreign supplier?
No. Payments to consultants and service providers located outside the UAE are not subject to withholding tax while the rate remains 0%, so the supplier receives the full amount.
Is there a withholding tax return to file in the UAE?
No. Because the rate is zero, there is no separate registration or filing requirement specific to withholding tax.
Why does the law include withholding tax if the rate is 0%?
Withholding tax remains part of the Corporate Tax law so the framework is already in place. The rate can be changed through a Cabinet Decision without rewriting the law.
How is withholding tax different from VAT?
Withholding tax applies to cross-border payments such as dividends, interest and royalties and is currently 0%. VAT applies to goods and services supplied within the UAE at 5%, with registration required once taxable turnover exceeds AED 375,000.
This article is provided for general informational purposes only and does not constitute tax, accounting or legal advice. UAE VAT requirements can vary depending on a business's activities, transactions and circumstances. Businesses should refer to current UAE legislation and Federal Tax Authority guidance and obtain professional advice where appropriate.