A common dilemma facing international businesses is deciding on the jursdiction to establish a holding company to hold its foreign investments.

A number of critical issues come into play in the decision making process such as: (a) tax efficiency (including reliance on double tax treaties (DTAs)), thin capitalisation and transfer pricing risks and new substance requirements in relation to holding companies; (b) reliance on investment treaties (BITs); (c) exchange control and repatriation risk; (d) reputation and efficiency of the applicable legal system (this is even more pertinent in a joint venture situation as disputes can arise between JV partners); and (e) depth of banking infrastructure and availability of banking products for example currency hedging products.

In this article we consider holding company structures utilising UAE holding companies established in the  Dubai International Financial Centre (DIFC) (established in the Emirate of Dubai) and Abu Dhabi Global Market (ADGM) (established in the Emirate of Abu Dhabi). It is the case that other well established free trade zones exist in the UAE offering attractive investment holding structures like, for example, RAK International Corporate Centre (RAK ICC). RAK ICC  offers attractive holding company structures and RAK ICC regulations have been amended to (amongst other things): (i) permit incorporation of segregated porfolio companies and intellectual property holding companies; (ii) allow for re-domiciliation of existing companies established in certain other jurisdictions; (iii) remove minimum capital requirements; (iv) incorporate special purpose vehicles; and (v) incorporate English common law principles in the constitutional documents with access to DIFC and ADGM courts.

Dubai International Financial Centre (DIFC) and Abu Dhabi Global Mark (ADGM)

Financial free zones generally permit the undertaking of a wide variety of financial and banking businesses including banking, trust set up, investment advisory and the like. Each of the DIFC and ADGM has its own legal system based substantially on English common law with established independent courts also based on the English court system manned with senior common law judges. These financial centres have also established arbitration centres modelled on best international standards.

Although many holding companies are incorporated as “standard” private companies with limited liability, it is also possible to use more sophisticated legal entities such as segregated portfolio companies or cell companies. A cell company is a limited liability company which consists of one or more cells. The revenue streams, assets and liabilties of each cell are ring-fenced and kept independent from the cell company itself (which is known as the Core) and the other cells and as such, there is no risk of cross-contamination between the cells and/or the Core and the creditors of a specific cell can only make claims against the assets of that particular cell. Additionally, each cell can have its own distinct group of shareholders. Cell companies are increasingly being used by corporate groups which own businesseses in different sectors and specifically where certain sectors are high-risk (for example, a multinational group involved in the FMCG, Oil & Gas and commodities trading sectors) as they allow multinational groups to keep the revenue streams, assets and liabilities of each business sector ring fenced from the other business sectors and as such reduce the risk of losses in one business sector impacting the other business sectors within the same corporate entity.


We have highlighted below some of the key benefits of using UAE holding companies either as ultimate or intermediary holding companies.






Foreign ownership




Corporate income tax




Personal income tax




Withholding tax (dividends, interest and royalties)




Capital gains tax

No capital gains tax (CGT) on disposal of shares.

No CGT on disposal of shares.


Stamp duty

No stamp duty on disposal of shares except in cases where the holding company in DIFC or any of its subsidiaries own real estate in the UAE.

No stamp duty on disposal of shares except in cases where the holding company in ADGM or any of its subsidiaries own real estate in the UAE.


Capital repatriation

No capital repatriation restrictions.

No capital repatriation restrictions.


Currency restrictions

No currency restrictions

No currency restrictions

UAE Tax Residency Certificate and Double Tax Treaties

In addition to the abovementioned benefits, a holding company established in the DIFC or ADGM is also eligible to apply for a Tax Residency Certificate. In the UAE, a Tax Residency Certificate is only issued upon satisfaction of certain basic economic substance requirements prescribed by the UAE Ministry of Finance which include, inter alia, the applicant company to be in existence for a period of more than 12 months and to have a trade license, audited financial accounts and a lease agreement for office space.

Upon obtaining a Tax Residency Certificate, companies would be eligible to place reliance on DTAs entered into by the UAE. The UAE has a wide network of DTAs with African countries. At present, the UAE has signed 23 DTAs with African countries out of which 13 are in force withincluding the DTAs with: (i) Kenya; (ii) Mozambique; (iii) Mauritius; (iv) South Africa; and (vi) Egypt. By way of comparison, the Netherlands has 11 DTAs in force with African countries whilst Mauritius has 18 DTAs in force with African countries.

Bilateral Investment Treaties

BITs are agreements entered into between two countries in order to establish the terms and conditions applicable to the treatment of private investors from one country in the other country. While the provisions of BITs will depend on negotiations between the countries, BITs generally contain provisions aimed at:

  1. allowing free repatriation of monies in freely transferable currencies;
  2. fair and equitable treatment between all trading partners;
  3. protecting investments from non-commercial risks – for example, expropriation, and nationalisation; and
  4. ability for disputes between the investor and the country of investment to be referred to international arbitration.

In addition to having a wide network of DTAs, the UAE has also signed BITs with 17 African countries out of which 10 are in force with African countries including: (i) Kenya; (ii) Mauritius; (iii) Egypt; and (iv) Morocco.

Soft benefits

In addition to the legal and tax benefits, there are a number of soft benefits that can be enjoyed assisting businesses in increasing operational efficiency, such as:

  1. ease of travel within the MEA region from the UAE;
  2. relaxed visa regime in the UAE which allows employees (and their families) of the UAE holding company to obtain residency visas to live in the UAE;
  3. availability of many international banks with high quality and technology driven banking systems;
  4. a maximum time difference of 4 hours between UAE and countries in the MEA region;
  5. safety - UAE is recognised as being one of the safest countries in the world;
  6. higher standard of living for employees;
  7. developed and modern infrastructure for sea and air cargo which includes the Jebel Ali Port, the leading port in the Middle East; and
  8. short sea distance with most countries in the MEA region.


In light of the above, multinationals and family businesses making investments or having operations in the MEA region should examine their current corporate structures and consider the benefits which they may enjoy by integrating a UAE holding company in their corporate structures.

In addition, following the recent introduction of Base Erosion and Profit Shifting (BEPs) framework in almost all ‘no or only nominal tax’ juridictions including UAE, it will be necessary for companies established in the UAE to undertake an analysis and ensure compliance with BEPs regime. The BEPs regime is similar in most ‘no or nominal tax’ jurisdictions and further information on the application of the BEPs regime is set out in our article here https://ach-legal.com/blog/UAE-Economic-Substance-Regulations-issued.