UAE Withholding Tax: Rate, Who It Covers & Related Rules

The UAE's withholding tax rate is 0% on state-sourced income paid to non-residents. See what that covers, what still costs you, and what to check.

4 November 2026Qawi7 min read

Key takeaways

The UAE's withholding tax rate on state-sourced income paid to non-resident persons is 0%, set in Article 45 of Federal Decree-Law No. 47 of 2022 (as replaced by Federal Decree-Law No. 40 of 2024), as of 04 November 2026.
A UAE company paying a dividend, interest or royalty to a non-resident, with no permanent establishment in the UAE, currently has no withholding tax to deduct or remit, because the rate is 0%.
The 0% rate is not a blanket exemption: income attributable to a UAE permanent establishment of a non-resident is taxed under the ordinary corporate tax rules, and the 0% applies only to state-sourced income outside that.
UAE VAT can still apply to payments to foreign suppliers: a VAT-registered UAE business receiving services from abroad generally has to account for VAT itself under the reverse charge.
The Cabinet can change the rate or the income categories by decision without a new law, so a positive withholding tax rate is legally possible even though none applies today.
A UAE company that suffers withholding tax abroad can claim a foreign tax credit, capped at the UAE corporate tax due on that income, with no carry-forward or carry-back.

Does the UAE have withholding tax?

Yes, the mechanism exists in law, but the rate is 0%. Article 45 of the Corporate Tax Law sets withholding tax on the state-sourced income of a non-resident person at 0%, unless the Cabinet sets a different rate by decision. The Ministry of Finance describes withholding tax as a form of corporate tax collected at source by the payer on behalf of the recipient, and says it typically applies to cross-border dividends, interest and royalties.

0%: the UAE withholding tax rate on state-sourced income of non-resident persons. Source: Federal Decree-Law No. 47 of 2022, Article 45 (as replaced by Federal Decree-Law No. 40 of 2024); Ministry of Finance corporate tax page, checked 04 November 2026.

Which payments does the 0% rate apply to, and who is it for?

The 0% rate applies to state-sourced income earned by a non-resident person that is not attributable to a permanent establishment in the UAE. Article 13 of the Corporate Tax Law treats income as state-sourced if it comes from a resident person, or accrues from activities performed, assets located or capital invested in the UAE.

Here is how the main cases sit under the rules, as of November 2026:

Situation	Treatment	Source
Non-resident receives UAE-sourced dividend, interest or royalty, no UAE permanent establishment	Withholding tax at 0%	Corporate Tax Law, Article 45
Non-resident has a UAE permanent establishment	Income attributable to it is taxed under ordinary corporate tax rules	Corporate Tax Law, Article 12; FTA non-resident guidance
Non-resident company with only state-sourced income, no permanent establishment or immovable property nexus	No corporate tax registration required	FTA guide for non-resident persons, 01 November 2023
Non-resident individual with UAE permanent establishment turnover above AED 1,000,000 in a calendar year	Must register for corporate tax	FTA guide for non-resident persons, 01 November 2023

Do I have to deduct, file or pay anything today?

Not for withholding tax itself, because 0% of a payment is nothing to deduct. Article 45 does say that, if a positive rate applied, the payer would deduct the tax from the gross payment and remit it to the FTA in the form, manner and timeline the FTA prescribes. We haven't found any form or filing deadline for a positive rate, because none has been introduced; check tax.gov.ae before relying on any third-party description of one.

A UAE company that pays a foreign group company still has other duties: keeping the payment documented, pricing it at arm's length if the foreign party is a related party, and accounting for VAT where it applies. If you'd rather not track these dates by hand, the free UAE compliance calendar lists them for your company.

Does VAT apply when I pay a foreign supplier?

Often yes, and this is where payments abroad actually cost UAE businesses money. A VAT-registered business that receives services from outside the UAE, where the place of supply is the UAE, must account for the VAT itself under the reverse charge, unless the services would be exempt if supplied locally. The FTA calls these "concerned services" in public clarification VATP044.

The mechanics, as set out in VATP044:

Report the value of the service and the output VAT in Box 3 of the VAT return for the period in which the supply date falls.
Issue a tax invoice to yourself within 14 days, unless you hold the overseas supplier's invoice with the required details or the FTA has granted an administrative exception.
Recover the input VAT to the extent the service is used for taxable supplies, and keep the supplier's invoice as support.

Say a SHAMS marketing company pays AED 100,000 a year to a foreign software provider (a hypothetical example). If the reverse charge applies, it reports AED 5,000 of output VAT at 5%, and recovers the same amount as input VAT if it makes fully taxable supplies. Withholding tax plays no part in that calculation.

What happens when another country withholds tax on my UAE company's income?

A UAE taxable person can claim a foreign tax credit against its UAE corporate tax. Article 47 caps the credit at the corporate tax due on the relevant income, bars carrying unused credit forward or back, and requires you to keep the records needed to support the claim.

The rate that applies abroad comes from the paying country's law and any double tax treaty, not from UAE rules. Treaty relief is not automatic: it depends on the treaty's terms and on you proving where the company is tax resident. Confirm the treaty and the proof the foreign payer will accept before the first payment is made, not after tax has been withheld.

Could the UAE introduce a positive withholding tax rate?

It could do so by Cabinet decision, but the Ministry of Finance still describes the rate as 0% as of 04 November 2026. Article 45 lets the Cabinet, on the Minister's suggestion, set different rates for categories of state-sourced income, or apply withholding tax to other income.

Two changes are worth tracking. Federal Decree-Law No. 40 of 2024 replaced Articles 45 and 46, and Federal Decree-Law No. 28 of 2025 added Article 49 bis on claims for unused tax credits from certain incentives or reliefs. Neither introduced a positive withholding rate. A related but separate charge is the domestic minimum top-up tax, which applies only to large multinational groups: Constituent Entities of groups with consolidated revenue of EUR 750 million or more in at least two of the four preceding financial years, for financial years starting on or after 1 January 2025, under Cabinet Decision No. 142 of 2024.

What most guides don't tell you

The 0% only covers income outside a permanent establishment. Articles describing the UAE as having "no withholding tax" skip the carve-out in Article 45: if a non-resident's UAE income is attributable to a permanent establishment, the ordinary corporate tax rules apply instead. A foreign contractor with a fixed UAE presence is the usual place this matters.
Withholding tax and the reverse charge are different systems. The reverse charge is a VAT mechanism with a return box and a 14-day self-invoice rule; withholding tax is a corporate tax mechanism with a 0% rate. Treating a payment as "no withholding, so no tax" misses the VAT.
The credit machinery already exists. Article 46 lets a taxable person offset withholding tax deducted under Article 45 against corporate tax, capped at the lower of the two, with any excess refunded under Article 49. It has no practical effect at 0%, but it's the reason a rate change would flow straight into corporate tax returns.
Foreign payers may ask for evidence you haven't prepared. Because treaty relief isn't automatic, a foreign counterparty can withhold at the domestic rate until you prove residency. Starting that conversation at contract stage costs less than reclaiming tax later.

Which deadlines apply to your company?

Withholding tax is zero for now, but VAT returns, corporate tax filings and licence renewals all run on fixed dates. The free UAE compliance calendar is a calendar of your company's UAE tax and compliance deadlines, personalised from a few questions, as a PDF and calendar file.

Frequently asked questions

Does Pillar Two apply to my UAE business?

Only if your company belongs to a multinational group with consolidated annual revenue of EUR 750 million or more in at least two of the four preceding financial years. Standalone SMEs and smaller groups are outside the UAE's domestic minimum top-up tax.

What is the domestic minimum top-up tax in the UAE?

It's a minimum tax of 15% on the UAE profits of in-scope multinational groups, introduced by Cabinet Decision No. 142 of 2024 and applying to financial years starting on or after 1 January 2025. It's separate from the 0% withholding tax and from the 9% corporate tax.

How do I get a corporate tax deregistration done?

You apply through EmaraTax, generally within 3 months of the date the business ceases or the company is dissolved or liquidated, under FTA Decision No. 6 of 2023. Clear any outstanding returns and tax first; the decision to deregister you sits with the FTA.

Does UAE corporate tax apply to foreign companies with a UAE branch?

Yes: income attributable to a UAE permanent establishment is taxable under the Corporate Tax Law, and a UAE branch will usually be one. Taxable income above AED 375,000 is taxed at 9%, as of November 2026.

About Qawi

About Qawi · Qawi is a corporate services firm licensed in the Sharjah Media City (SHAMS) free zone, handling company formation, visas and PRO, bookkeeping, VAT and corporate tax for UAE businesses. Guides are researched from FTA, Ministry of Finance and free zone sources. Qawi on LinkedIn

Sources

Last checked: 04 November 2026

This is general information, not tax or legal advice for your specific situation.