The United Arab Emirates (UAE) has emerged as a premier jurisdiction for businesses seeking to establish holding companies to manage shares, companies, and business entities across multiple jurisdictions. According to the 2023 Statistical Bulletin of China's Outward Foreign Direct Investment, foreign direct investment (FDI) flows from China to the UAE have shown robust growth for three consecutive years. According to the Report on the Development of Chinese Enterprises in the UAE (2023–2024), as of 2024, more than 6,000 Chinese enterprises are registered in the UAE, with 72% reporting profitability and 45% achieving year-on-year profit growth—underscoring the UAE’s business-friendly regulatory and economic environment.
Geographically, the UAE serves as a strategic gateway to a 2-billion-consumer market spanning Asia, Africa, and Europe. Prominent Chinese logistics companies have capitalized on Dubai’s world-class air cargo infrastructure to expand their cross-border operations in the region. At the same time, in the context of escalating U.S. tariffs on Chinese goods, the UAE’s 10% baseline tariff regime and flexible re-labeling protocols have enhanced its position as a key hub for mitigating international trade barriers.
Against this backdrop, Chinese enterprises have accumulated substantial operational experience in the UAE across a wide range of sectors. In 2022, a leading Chinese solar energy company established an office in Dubai to initiate local operations, and now employs over 30 professionals handling sales, logistics, legal, finance, and marketing. The firm has since expanded its regional presence through partnerships with key local entities, including the Dubai Electricity and Water Authority (DEWA).
On June 13, 2024, a major Chinese oil and gas equipment manufacturer deepened its UAE footprint by signing a strategic cooperation agreement with the Jebel Ali Free Zone (JAFZA) to develop an integrated manufacturing and service base covering production, procurement, logistics, and after-sales support. Similarly, on March 21, 2025, an innovative Chinese pharmaceutical technology firm executed a commercial cooperation agreement in Abu Dhabi to launch the Middle East’s first automated traditional medicine R&D laboratory, backed by an initial investment of USD 30 million.
The UAE has also attracted high-growth Chinese technology firms. On October 8, 2024, the UAE Ministry of Economy announced the inclusion of a Chinese artificial intelligence startup in its NextGen FDI Program, granting the company fast-track business setup, enhanced access to financial services and capital, and deeper integration into the global enterprise ecosystem.
Meanwhile, the logistics sector has witnessed rapid scaling. A major Chinese courier company established its Middle East subsidiary in Dubai and formed a joint venture with a leading Saudi enterprise to build a localized delivery network spanning Saudi Arabia, the UAE, and Bahrain. By 2023, another top-tier Chinese express delivery company had scaled its UAE operations from five employees in 2021 to 750, supported by a delivery fleet of 500 vehicles and warehouse space exceeding 15,000 square meters.
This article explores the advantages of setting up a UAE holding company, the types of companies available, and the banking efficiency associated with each option. By leveraging the UAE's unique benefits—such as tax efficiency, financial flexibility, and legal stability, businesses can not only optimize their international operations effectively, but also serves as a pivotal mechanism to advance the Belt and Road Initiative (BRI) while mitigating geopolitical exposure
I. Advantages of Establishing a UAE Holding Company
Businesses choose the UAE to hold foreign assets due to its compelling mix of tax advantages, financial freedom, legal protections, and strategic positioning. These factors make it an ideal hub for managing international investment efficiently.
1. Tax Efficiency
(1) No Corporate Tax on local- and foreign-sourced dividends and capital gains received by a company registered in any of the UAE Free Zones subject to this company retaining a qualifying status, meaning that its revenues are generated from conducting qualifying activities, company has substance, it is compliant with transfer-pricing rules and adheres to certain other requirements. Holding investments is one of the qualifying activities if such investments are held long-term. i.e. for at least 12 months.
(2) No Corporate Tax on local-sourced dividends received by a company which is subject to general taxation rules (i.e. a UAE Mainland company or a Free Zone company without a qualifying status).
(3) No Corporate tax on capital gains and foreign-sourced dividends received by a company which is subject to general taxation rules, if such a company complies with participation exemption rule that requires compliance with certain criteria regarding the length of ownership of shares in the subsidiary, their volume, and certain characteristics of the subsidiary
(4) Double Taxation Avoidance Treaties (DTAs): The UAE has DTAs with over 120 countries, including 27 in Africa (e.g., Nigeria, Kenya, South Africa). These agreements reduce or eliminate taxes on cross-border dividends, interest, and royalties, preventing double taxation and boosting cash flow from foreign entities.
(5) No Withholding Tax: Unlike many jurisdictions, the UAE imposes no withholding tax on outbound payments, such as dividends or profits repatriated from the holding company to its owners, making it cost-effective to channel funds through the UAE.
(6) Under Article 23 of Enterprise Income Tax Law of the People's Republic of China (Foreign Tax Credit Rules), Chinese enterprises utilizing a UAE holding structure to repatriate overseas profits to China may avoid double taxation between domestic corporate income tax (25%) and foreign tax liabilities. It is critical to note that the design of the UAE holding structure must strictly comply with the Announcement on Issuing the Measures for the Administration of Adjustments under Special Tax Investigation and Mutual Consultation Procedures (Announcement No. 6 [2017] of the State Administration of Taxation) to mitigate risks of back taxes and tax look-through treatment. For instance, undistributed profits of overseas entities must be retained for legitimate business needs, necessitating the establishment of substantive operations within the UAE entity.
2. Free Currency Exchange and Financial Flexibility
The UAE free currency exchange regime offers significant advantages for companies managing foreign entities:
(1) Unrestricted Fund Transfers: There are no restrictions on converting AED to foreign currencies (e.g., USD, EUR, GBP) or transferring funds internationally. This facilitates seamless movement of dividends, capital, or operational funds to and from foreign subsidiaries.
(2) Exchange Rate Stability: The AED is pegged to the USD at AED 3.6725 = $1, minimizing exchange rate risks and providing predictability for transactions in volatile markets.
(3) Multi-Currency Banking: UAE companies can maintain accounts in AED or major foreign currencies, enabling direct transfers without multiple conversions, reducing costs and delays.
(4) No Capital Controls: Unlike jurisdictions with limits on international fund movements, the UAE imposes no such restrictions, supporting large-scale investments without bureaucratic obstacles, which helps facilitate Chinese enterprises' compliance with domestic ODI regulatory frameworks when initiating cross-border capital movements.
(5) Global Financial Integration: The UAE banking system, integrated with SWIFT, ensures efficient global transactions, enhancing financial management.
3. Legal and Ownership Benefits
(1) 100% Foreign Ownership: Since the 2021 amendments to Federal Law No. 2 of 2015, Free Zone and Mainland Companies (except for certain restricted activities such as in the military or other fields of high public control) allow full foreign ownership without a local sponsor, granting businesses complete control over their UAE holding company and foreign assets.
(2) Asset Protection: The UAE’s stable legal and political environment provides a secure base for holding assets in less stable regions (e.g., parts of Africa).
(3) Flexible Structures: Options like Free Zone (e.g., DIFC, ADGM, IFZA, DMCC), or Mainland Companies allow businesses to tailor the holding company to their needs—whether for pure holding, active management, or regional operations.
4. Economic Stability
(1) Haven: The UAE offers a stable environment, reducing risks to ownership and control of foreign entities.
(2) Investor-Friendly Policies: The UAE government promotes foreign investment through incentives, modern infrastructure, and a pro-business regulatory framework.
5. Strategic Business Advantages
(1) Risk Mitigation: A UAE holding company acts as a legal buffer, protecting the parent entity from issues like lawsuits or insolvency in foreign jurisdictions.
(2) Exit Strategy: Selling shares in a UAE holding company (which owns the foreign entity) can be simpler and more tax-efficient than selling the foreign entity directly.
II. Types of UAE Holding Companies
The choice of company type—Free Zone or Mainland—depends on goals like asset protection, tax efficiency, ease of management, and operational flexibility. Each offers distinct features and trade-offs.
1. Free Zone Company
Free Zone Companies (e.g., DIFC, ADGM, IFZA, DMCC) offer a robust framework for holding companies, requiring a minimal physical presence in the zone.
(1) Key Features:
a. 100% Foreign Ownership: No local sponsor needed.
b. Tax Benefits: Qualifying Free Zone Persons enjoy 0% tax on qualifying revenues including dividends and capital gains received from long-term (over 12-months) investments subject to compliance with other criteria. DTAs apply.
c. Holding Structure: No need for specific approvals for owning subsidiaries and managing investments, procedure for adding a holding activity is rather straight-forward but may differ in various Free Zones.
d. Physical Presence & Visa Eligibility
Most Free Zones require a minimal physical presence—such as a flexi-desk office— which also enables eligibility for residency visas. However, visa policies differ:
• DIFC and ADGM are well-suited for pure Special Purpose Vehicles (SPVs) and provide advanced legal frameworks based on English common law. However, SPVs in these zones typically cannot apply for visas for investors/employees or engage in commercial activities beyond holding.
• IFZA, DMCC, Meydan, and DWTC are more versatile, allowing holding companies to also engage in other licensed activities and apply visas for investors or employees, although their legal frameworks may not offer the same level of sophistication as DIFC and ADGM.
e. Regulatory Environment：ADGM benefit from internationally recognized common law systems, which enhance credibility and investor confidence, particularly for companies seeking alignment with international standards. Other Free Zones apply their own corporate regulations, which are distinct from Mainland UAE company law.
(2) Limitations:
a. Higher setup and maintenance costs in DIFC and AGDM (e.g., office leases, fees), while such Free Zones as IFZA and DMCC are competitive in terms of pricing.
b. More compliance (e.g., requirement for an annual audit in some zones).
(3) Best For:
Active management of foreign entities with a UAE base and residency options. Such as cross-border e-commerce, equity holding and investment platforms, and digital service providers - entities characterized by asset-light structures, tax-efficient frameworks, and streamlined compliance obligations.
2. Mainland Holding Company
A Mainland LLC, registered with the Department of Economic Development (DED), offers flexibility for both UAE and international operations.
(1) Key Features:
a. Ownership: 100% foreign ownership allowed since June 2021 for most activities, including holding companies.
b. Taxation: Subject to 9% tax on UAE-sourced profits over AED 375,000, unless participation exemption applies, in that event capital gains and foreign dividends are entitled to exemption. local dividends (dividends received by a UAE company from another UAE-resident company) are fully exempt from corporate tax, regardless of ownership percentage or holding period.
c. Flexibility: Can hold foreign assets, trade locally, and serve as a regional hub.
d. Residency: Provides visas and a physical UAE presence.
(2) Limitations:
Requires a physical office and higher costs.
More bureaucratic procedures.
(3) Best For:
Combining holding with UAE-based operations, despite added costs, such as manufacturing industries, infrastructure and engineering contracting, localized service enterprises (education and training, healthcare, etc.), and regional headquarters - entities characterized by asset-intensive operations, localization-driven mandates, and government-collaborative frameworks.
III. Banking Efficiency Across Company Types
Banking efficiency in the UAE—encompassing account opening, fund transfers, and additional services—varies by company type, impacting how effectively a holding company manages foreign assets.
1. Bank Account Opening
With the support of experienced professionals in the UAE, both Free Zone and Mainland companies can typically open corporate bank accounts within 2 weeks to 1 month, provided that the required documentation is in order.
(1) Free Zone Companies:
a. Advantages: Presence in established well-regulated zones (e.g., DIFC, ADGM, DMCC) help streamline the process.
b. Bank Options: Broad access to major banks, enhancing flexibility.
(2) Mainland Companies:
a. Advantages: Quick setup (1-2 months) with straightforward compliance, leveraging local presence and oversight.
b. Bank Options: Preferred by major UAE banks, offering extensive choices.
2. Fund Transfers
(1) Processing Speed:
All types benefit from UAE's SWIFT integration (usually 1-3 days globally).
(2) Cost Efficiency:
Free Zone and Mainland Companies can often secure lower fees through established relationships.
3. Additional Banking Aspects
(1) Compliance and KYC:
For both Free Zone and Mainland companies, banks in the UAE generally offer a smooth account setup process when transactions are transparent, and business activities are legitimate. While initial documentation is required, ongoing KYC procedures are typically straightforward, especially when fund movements are clean, and amounts increase gradually. A physical presence in the UAE further supports credibility and simplifies compliance with banking requirements.
(2) Access to Services:
a. Credit Facilities: Free Zone and Mainland Companies can secure loans or overdrafts.
b. Online Banking: All types of access digital platforms, but Free Zone and Mainland Companies integrate faster for bulk payments or treasury management.
c. Letters of Credit/SBLC: Issuing financial instruments is simpler for Free Zone and Mainland Companies.
IV. Tax Duties and Tax Structures of Each Company Type
Each UAE company type has distinct tax duties and structures, shaped by federal laws. This impacts on how income from the foreign entity (e.g., dividends, capital gains) is taxed and managed.
1. Free Zone Company
(1) Tax Duties:
a. Corporate Tax: Qualifying Free Zone Persons enjoy 0% tax on qualifying income (e.g., dividends from long-term (more than 12-month) investments) under Federal Law No. 47 of 2021, provided they meet substance requirements (e.g., adequate UAE presence), comply with transfer-pricing rules and adhere to certain other requirements. If an SPV loses its qualifying status, its total profits over AED 375,000 are taxed at 9% per Federal Law No. 48 of 2021, unless certain exemptions (e.g. participation exemption) apply.
b. VAT: 5% VAT applies to UAE taxable supplies (e.g., local services), per Federal Decree-Law No. 8 of 2017, while dividends and capital gains are not taxable supplies and are not subject to VAT.
c. Withholding Tax: None on outbound payments, according to Federal Law No. 48 of 2021.
d. DTAs: The UAE has signed DTAs with over 120 countries, allowing businesses to minimize or eliminate withholding taxes on cross-border dividends, interest, and royalties. This enhances cash flow and prevents double taxation in many key markets, depending on the specific treaty terms in each jurisdiction.
(2) Tax Structure:
a. Compliance: Companies must register for Corporate Tax within 3 months of incorporation and for VAT once the mandatory threshold of AED 375,000 in taxable supplies is reached. Certain Free Zones may still require annual audits based on local regulations, though this is no longer a condition for retaining qualifying status under the corporate tax regime.
2. Mainland Holding Company
(1) Tax Duties:
a. Corporate Tax: Subject to 9% tax on taxable profits over AED 375,000 under Federal Law No. 48 of 2021, albeit local dividends are exempt while capital gains and foreign dividends may be exempt if participation exemption rules (e.g., owning ≥5% of the African entity for 12+ months and certain other criteria) are complied with. Without exemptions, all profits are taxable. Local dividends (dividends received by a UAE company from another UAE-resident company) are fully exempt from corporate tax, regardless of ownership percentage or holding period.
b. VAT: 5% VAT applies to UAE taxable supplies (e.g., local services), per Federal Decree-Law No. 8 of 2017, while dividends and capital gains are not taxable supplies and are not subject to VAT.
c. Withholding Tax: None on outbound payments, according to Federal Law No. 48 of 2021.
d. DTAs: The UAE has signed DTAs with over 120 countries, allowing businesses to minimize or eliminate withholding taxes on cross-border dividends, interest, and royalties.
(2) Tax Structure:
a. Comprehensive: All income (UAE and foreign countries) is potentially taxable unless exempt. Require detailed tax filings, profit calculations, and FTA registration, per Federal Decree-Law No. 7 of 2022. Foreign income exemptions hinge on treaty terms or specific conditions (e.g., holding period).
V, Cost and Maintenance Expenses of Each Company Type
The financial commitment for establishing and maintaining a UAE company varies by company type. Costs include setup fees, annual renewals, and operational expenses, governed by UAE regulations and free zone policies.
1. Free Zone Company
(1) Initial Setup Costs: Approximately $5,000–$12,000, covering:
a. License fee ($2,000–$4,000).
b. Office space (flexi-desk, from zero (when included into the license fee) up to $4,000), mandatory per free zone rules.
c. Registration and legal fees ($3,000–$4,000), per Federal Law No. 2 of 2015.
(2) Annual Maintenance Expenses: Around $4,000–$8,000, including:
a. License renewal ($2,000–$3,000), per free zone policies.
b. Office lease renewal (from zero (when included in the license fee) up to$4,000).
c. Audit fees ($1,000–$2,000), if required by Economic Substance Regulations.
(3) Additional Costs:
a. Visa fees ($1,500–$2,000 per visa), optional.
b. Corporate Bank account setup (up to $5,000), one-time.
c. Key Considerations: Mid-range costs reflect physical presence and compliance. Costs vary by zone (e.g., DIFC is pricier than smaller zones like Ajman Free Zone).
2. Mainland Holding Company
Costs are like the cost of establishing a company in a Free Zone; the difference is usually that office lease costs are significantly higher than in a free zone, and there are notary costs which are usually not higher than $1,000)
VI. Conclusion
Against the backdrop of profound changes in the global economy and international relations, Chinese enterprises going global are navigating a complex landscape of intertwined challenges and opportunities. Ongoing geopolitical turbulence, rising protectionist policies, and xenophobic tendencies in multiple countries have increased regulatory uncertainty and introduced sudden operational risks. In this context, the United Arab Emirates (UAE), with its favorable tax regime, free currency convertibility and capital flexibility, legal and equity advantages, economic stability, and strategic business strengths, has emerged as a strategic anchor for enterprises amidst global volatility. The UAE’s free zones and onshore company structures directly address foreign investors’ needs for risk diversification and regulatory certainty, while safeguarding the security of corporate cash flows in international markets. As a result, the UAE has gradually become a critical hub and preferred destination for Chinese enterprises in their global expansion. It is therefore recommended that Chinese companies, when formulating globalization strategies, proactively assess the policy stability and structural advantages of target markets and leverage the UAE as a platform for strategic coordination and risk mitigation.
Source: Jingtian & Gongcheng Law Firm
Authors:
- Jinjin Chen, partner of Jingtian & Gongcheng Law Firm. (86-10)58091178, chen.jinjin@jingtian.com
- Iaroslav V. Cheker , Managing Partner at CMBS Partners and seasoned Attorney-at-Law with deep expertise across Corporate Law, Corporate Governance, Contractual Arrangements, Energy & Natural Resources, and Land & Agricultural Law.
Disclaimer:
Jingtian & Gongcheng and CMBS Partners are independent law firms. The co-authorship of this article is based solely on professional collaboration and mutual exchange of legal insights. This does not constitute a joint venture, partnership, or any form of exclusive affiliation between the two firms, particularly with respect to legal services in the UAE/Dubai. Any interpretation to the contrary is hereby disclaimed.