Relocating to the UAE: Key Considerations

The United Arab Emirates (UAE) continues to attract individuals, investors, entrepreneurs and international families. While the absence of personal income tax is a headline advantage, relocation requires careful planning - particularly in relation to tax exposure, cross‑border structuring, and succession arrangements.

Tax landscape

Currently, the UAE does not impose personal income tax on wages, investment income, or real estate income. However, since June 2023, a 9% corporate tax applies to individuals conducting licensed business activities in the UAE with annual turnover exceeding AED 1 million. This means that expatriates engaging in business must carefully assess their tax exposure.

Corporate Tax and the POEM test

A company’s tax residency in the UAE is determined by:

• Place of incorporation, and
• Place of effective management (POEM).

If a foreign-incorporated company is deemed resident in the UAE, its worldwide income may be subject to UAE corporate tax. Income attributable to foreign permanent establishments can be excluded if certain conditions are met.

For this reason, individuals should exercise caution when making strategic decisions for a foreign business while physically present in the UAE. The Federal Tax Authorities will take into account factors such as:

• Setting general policies and determining strategic operations (e.g., mergers, acquisitions, major asset transactions),
• Appointing and supervising executives,
• Managing key financial matters.

This POEM test draws inspiration from OECD Commentaries on the Model Tax Convention, and its alignment with the UK’s Central Management and Control (CMC) test remains to be clarified by future cases. 

Conducting activities from the UAE 

Individuals should be conscious that, even if the POEM test is bypassed, there are still risks involved if they conduct business activities from the UAE. The UAE will impose corporate tax on foreign income and gains if it can be linked to business activities conducted from the UAE. The Federal Tax Authority considers factors such as:

• Whether personnel involved in producing or selling goods and services are based in the UAE,
• Whether contracting or business development occurred in the UAE,
• Whether assets contributing to production or service delivery are located in the UAE.

Double Tax Treaties: Limited Protection for Expatriates

The UAE has established a broad network of more than 140 double tax treaties, and individuals who become UAE tax residents can obtain a Tax Resident Certificate to access treaty benefits. While a few older treaties contain specific provisions that may limit certain entitlements, these cases are relatively rare, and most treaties determine eligibility based on residency rather than nationality. 

For expatriates, this generally means that treaty relief is available, although the exact scope can differ from one treaty to another. As a result, it remains sensible to review the relevant treaty on a case‑by‑case basis, particularly where foreign income might fall within the UAE’s 9% corporate tax regime, to ensure the expected level of protection applies.

Succession planning

Individuals relocating should also consider their succession and estate planning. Under local law, Sharia succession principles apply by default to UAE citizens, but expats can opt out and register Wills made in accordance with their wishes.

If an individual dies without a valid Will, their assets may be distributed according to Sharia law, which could lead to outcomes that do not reflect their wishes. Individuals with dependents should also the importance of appointing their guardians. 

Professional advice is critical to ensure alignment between UAE‑registered wills and the individual’s home‑country succession rules, particularly for multi‑jurisdictional estates.

Conclusions

Relocating to the UAE offers significant tax advantages, but the rules are complex and often misunderstood. The introduction of corporate tax, the POEM test, and double tax treaties restrictions complexities indicate the importance of careful planning.

Beyond tax, relocation also brings critical succession and estate planning considerations. By default, the UAE applies Sharia principles, but expats can safeguard their wishes by putting in place a valid Will. Individuals with dependents should also safeguard guardians. These issues require tailored advice to ensure assets are protected and distributed according to their intentions.

Along with Yousafa Hazara and Melody Furman, Raya Abu Gulal, Managing Partner at R.A.G Legal Consultancy, UAE, contributed to this article.