Dilendorf Law Firm represents U.S. clients establishing holding companies and businesses in the United Arab Emirates. This is what we tell them first.
Key takeaways
- A free zone holding company is the most flexible route; a foundation is usually the least flexible.
- Income from holding shares for investment can qualify for the UAE’s 0% free zone corporate tax rate [1].
- In our experience, a UAE bank account takes six to eight weeks to open.
- The United States has no income tax treaty with the UAE, so U.S. tax planning must be built into the structure from day one [2].
Why are Americans setting up in the UAE?
Some clients are building trading businesses. Many run online businesses selling through Stripe, Shopify and similar platforms and need a licensed entity with reliable banking.
Others are relocating personal interests, and sometimes themselves. The UAE does not levy income tax on individuals [3], and its Golden visa gives investors and entrepreneurs a renewable five- or ten-year residence without a sponsor [4].
Why is a foundation the most inflexible route?
Foundations are often marketed to Americans as an all-purpose solution. In our experience they are the least flexible option.
- You give up ownership. Assets pass to a separate legal person governed by a charter and by-laws. Changing beneficiaries, purposes or control takes formal amendments and council action.
- It is not built for business. A foundation that conducts a business activity cannot qualify for the UAE’s transparent “Family Foundation” tax treatment and is instead taxed like any other company [5]. The Federal Tax Authority confirms ADGM and DIFC foundations are “treated the same as any other juridical person” for corporate tax [6].
- Banks and platforms ask harder questions. Onboarding a foundation takes longer than a company, and payment platforms expect a licensed operating entity.
- U.S. tax treatment is uncertain. A UAE foundation may be treated as a foreign trust, bringing Form 3520 and 3520-A reporting and a penalty of the greater of $10,000 or 5% of trust assets for a missed filing [7]. Unwinding it later is costly.
A foundation can suit multigenerational succession planning. For holding companies, investments or an online business, a holding company is almost always the better start.
Why is a holding company the go-to structure?
A free zone company can be fully foreign-owned, and a licence is typically issued within 14 working days of approval [8]. It trades freely within the zone and internationally; selling into the UAE mainland requires a distributor or mainland licence [9].
Standard UAE corporate tax is 0% on the first AED 375,000 of taxable income and 9% above it [10].
A Qualifying Free Zone Person pays 0% on Qualifying Income, and “holding of shares and other securities for investment purposes” is a Qualifying Activity if the shares are held at least 12 months; active trading does not qualify [1]. The company must maintain adequate UAE substance, prepare audited financial statements and comply with transfer pricing rules [6].
Which free zone is best for a holding company?
The right zone depends on what the company will do.
1
Pure holding company: ADGM
Abu Dhabi Global Market is a financial free zone with its own independent regulatory framework [11]. In our experience it is the strongest choice for holding shares, investments and intellectual property.
2
Dubai alternative: DIFC
Dubai International Financial Centre has the same independent regulatory status [11]. We recommend it when the client’s life and operations are centered in Dubai.
3
Operating business: DMCC or similar
A trading or e-commerce company in a commercial free zone such as DMCC, which licenses e-commerce, tech and crypto activities [8], usually sits beneath the holding company.
How long does a UAE bank account really take?
Plan for six to eight weeks. Banks review the ownership chain, source of funds, business plan and counterparties, and an American owner adds FATCA documentation.
Incomplete files restart the clock. Through our relationships with local UAE banks, we prepare the file before submission and manage follow-up questions.
What U.S. tax planning is required?
The IRS list of income tax treaties in force does not include the UAE [2], and U.S. citizens and residents are taxed on their worldwide income [12].
A UAE company owned by Americans is usually a controlled foreign corporation, requiring annual Form 5471 reporting [13] and current U.S. tax on the company’s earnings under the net CFC tested income (NCTI) regime that replaced GILTI for tax years beginning after December 31, 2025 [14].
The UAE’s 0% rate therefore does not mean 0% overall. Entity classification elections, ownership design and distribution timing decide the real result, and company accounts must be reported on an FBAR once foreign balances exceed $10,000 [15].
How Dilendorf Law Firm helps
Dilendorf Law Firm is a U.S.-based firm that assists American clients with UAE holding companies and operating structures from start to finish.
We advise on foundation versus holding company, select the free zone, coordinate incorporation and licensing, prepare the bank file through our access to local UAE banks, and design the structure around U.S. tax rules so the UAE’s advantages are not lost at home.
For clients relocating, we address residency, Golden visa eligibility and the U.S. reporting that follows them. Whatever the UAE question, American clients can bring it to us.
Frequently asked questions
Can I run my Shopify or Stripe store through the holding company?
Usually not directly. The holding company owns shares; a licensed operating company runs the store, contracts with the platforms and holds the merchant account.
Sources
[1] UAE Federal Tax Authority, Corporate Tax Guide: Free Zone Persons (CTGFZP1) (May 2024). https://tax.gov.ae/Datafolder/Files/Guides/CT/Free%20Zone%20Persons%20-%2020%2005%202024%20final%20for%20GCD.pdf
[2] Internal Revenue Service, United States Income Tax Treaties – A to Z. https://www.irs.gov/businesses/international-businesses/united-states-income-tax-treaties-a-to-z
[3] The Official Platform of the UAE Government, Taxation. https://u.ae/en/information-and-services/finance-and-investment/taxation
[4] The Official Platform of the UAE Government, Golden Visa. https://u.ae/en/information-and-services/visa-and-emirates-id/residence-visas/golden-visa
[5] UAE Federal Tax Authority, Corporate Tax Guide: Taxation of Family Foundations (CTGFF1) (June 2026). https://tax.gov.ae/Datafolder/Files/Pdf/2026/Guide/Family%20Foundations%20Guide%20-%20EN%20-%2005%2006%202026.pdf
[6] UAE Federal Tax Authority, General Corporate Tax Guide (CTGGCT1) (September 2023). https://tax.gov.ae/Datafolder/Files/Guides/CT/CT%20General%20Guide%20-%20EN%20-%2010%2009%202023.pdf
[7] Internal Revenue Service, Foreign Trust Reporting Requirements and Tax Consequences. https://www.irs.gov/businesses/international-businesses/foreign-trust-reporting-requirements-and-tax-consequences
[8] The Official Platform of the UAE Government, Starting a Business in a Free Zone. https://u.ae/en/information-and-services/business/Doing-business/doing-business-in-free-zones/starting-a-business-in-a-free-zone
[9] The Official Platform of the UAE Government, Running a Business in a Free Zone. https://u.ae/en/information-and-services/business/Doing-business/doing-business-in-free-zones/running-a-business-in-a-free-zone-
[10] The Official Platform of the UAE Government, Corporate Tax (CT). https://u.ae/en/information-and-services/finance-and-investment/taxation/corporate-tax
[11] The Official Platform of the UAE Government, Recruiting in Free Zones. https://u.ae/en/information-and-services/business/Doing-business/doing-business-in-free-zones/recruiting-in-free-zones
[12] Internal Revenue Service, Publication 901, U.S. Tax Treaties. https://www.irs.gov/publications/p901
[13] Internal Revenue Service, Certain Taxpayers Related to Foreign Corporations Must File Form 5471. https://www.irs.gov/individuals/international-taxpayers/certain-taxpayers-related-to-foreign-corporations-must-file-form-5471
[14] Congressional Research Service, Tax Provisions in P.L. 119-21 (R48611). https://www.congress.gov/crs_external_products/R/PDF/R48611/R48611.1.pdf
[15] Internal Revenue Service, Report of Foreign Bank and Financial Accounts (FBAR). https://www.irs.gov/businesses/small-businesses-self-employed/report-of-foreign-bank-and-financial-accounts-fbar
This article is for general informational purposes only and does not constitute legal or tax advice. Reading it does not create an attorney-client relationship with Dilendorf Law Firm. Attorney Advertising.