The UAE-UK double taxation treaty: what it means for UAE directors with UK companies

The UAE and UK signed a Double Taxation Agreement (DTA) in 1993, which has been in force since 1994. Similar agreements exist between the UK and Saudi Arabia (1994), Kuwait (1999), Qatar (2010), Bahrain (2012), and Oman (2010). These treaties are bilateral agreements that determine which country has the right to tax particular types of income when a person or business has a connection to both countries. For UAE-based directors of UK companies, understanding what the treaty does — and what it does not do — is essential.

The treaty's most direct impact for Gulf directors is on dividends. When a UK company pays a dividend to a UAE-resident shareholder, the UK has the right to withhold tax on that dividend. Under the UAE-UK DTA, the withholding rate on dividends is typically reduced to 15% (or 5% if the UAE-resident recipient holds at least 10% of the company's shares). In practice, many small UK companies don't withhold tax on dividends at all because the UK domestic rules already exempt many small company distributions — but where UK withholding applies, the treaty limits the rate.

On employment income, the treaty is less protective. A salary paid by your UK company for work carried out in the UK is UK-taxable regardless of where you live. If you're based in the UAE and never perform any work in the UK, the position is different — but many Gulf directors do visit the UK for business, and any salary attributable to UK-based work days is subject to UK income tax. The personal allowance (£12,570 for 2025/26) applies, so modest salaries may fall below the taxable threshold entirely.

What the treaty does not do is exempt your UK limited company from UK corporation tax. This is the most common misunderstanding we encounter with UAE-based clients. The company is a UK-registered legal entity. It is UK-resident for tax purposes. It pays UK corporation tax on its UK profits — at 19% for profits up to £50,000, and 25% above £250,000. The DTA operates at the level of personal income flowing between countries. It does not affect the company's UK corporation tax liability, which is a separate obligation entirely.

The 'permanent establishment' concept is worth understanding if your UK company has any physical UK presence — an office, a warehouse, a regular UK business base. If the UK company has a permanent establishment in the UK (which most UK-registered companies do, by definition), that establishment's profits are fully taxable in the UK regardless of the DTA. The treaty mainly becomes relevant when a Gulf director is also a UK tax resident, or when cross-border royalties, interest, or complex multi-jurisdiction structures are involved. For a straightforward Gulf-owned UK limited company, the practical message is: the DTA helps with personal income; your company still pays UK corporation tax.