26 August 2026 · The 0% Rate
UAE Withholding Tax: The 0% Rate
The UAE domestic withholding tax rate is 0%. UAE-sourced income paid to non-residents, including dividends, interest, royalties and service fees, leaves the country with no UAE withholding and no withholding return to file. But 0% withholding is not 0% tax overall. If the non-resident already has a permanent establishment in the UAE, the profit attributable to that PE is still taxed at 9% under the normal corporate tax rules. The two questions are separate.
Exiloz Management & Tax Consultant · Dubai-based FTA-focused advisory · VAT, corporate tax & accounting
Zero withholding is a payment result
Article 45 of Federal Decree-Law No. 47 of 2022 places certain categories of State Sourced Income earned by a non-resident, where the income is not attributable to a UAE PE, into the withholding-tax rule. The current rate is 0%. The FTA describes the practical result plainly: no withholding-tax registration or filing obligation arises in practice because there is no tax to remit.
That answer belongs to the payment, not to the whole relationship between the parties. A UAE company paying a foreign supplier must still identify the payment, its source and the recipient's UAE position. If the foreign supplier has a PE, income attributable to that PE is a Corporate Tax question. If the payment is taxed in the other country, that is a separate foreign-law question.
The FTA's withholding FAQ says that 0% may apply to certain types of UAE-sourced income paid to non-residents, while Article 45 states the PE condition. This is why the table below starts with classification instead of promising that every cross-border transfer is automatically outside the UAE tax system.
| Payment or income | What 0% answers | What still needs review |
|---|---|---|
| UAE-sourced payment to a non-resident | No UAE withholding at the current rate | Source and whether it is attributable to a PE |
| Dividend, interest, royalty or service flow | The domestic WHT rate may be 0% | Payment terms and the relevant income rule |
| Income attributable to a UAE PE | 0% WHT does not settle the result | PE profit attribution and Corporate Tax |
| Payment between UAE residents | FTA says WHT does not apply | Normal accounting and Corporate Tax treatment |
Do not turn a rate into a tax opinion
The domestic 0% rate can make a payment operationally simple, but it does not erase the need to classify the income. Start with the invoice, underlying contract and bank payment instruction. Match the description to the work or right that produced the amount. A service invoice, an interest schedule and a royalty licence are different evidence, even if the bank narration is vague.
The FTA's non-resident guidance separates income attributable to a PE from State Sourced Income that is not attributable to a PE. That distinction matters for a foreign business supplying services through a UAE office, site or agent. A payer should not use the words no withholding to close the file when the contract and the operating model suggest a PE review is needed.
The object that makes the claim true is the payment file. Keep the invoice, contract, recipient details, work location, delivery evidence and bank advice together. If the payment relates to an identifiable UAE project or a UAE representative, add the PE assessment. The result should be reproducible by somebody who did not approve the original transfer.
The 0% rate does not shelter PE profit
A foreign company can have both an outbound payment and a UAE PE in the same commercial relationship. For example, a UAE customer may pay a foreign contractor while the contractor performs an installation project through a UAE site. The payment file can show 0% domestic withholding, while the contractor's attributable PE profit still needs its own Corporate Tax analysis.
The FTA FAQ confirms the practical 0% result, and the FTA PE page confirms that a fixed place, dependent agent or building site can bring a non-resident into the PE rules. Neither page says that a payer can decide PE status from the invoice alone. Read the contract, the place of performance and the people who settled the deal.
There is a genuine evidence boundary. The FTA FAQ says 0% may apply to certain types of State Sourced Income, but it does not decide every classification for a mixed contract containing goods, services, financing or intellectual property. It also does not state how a particular bundled invoice should be split. Apply the source and PE analysis to the actual agreement instead of stretching a simple rate statement over a complicated supply.
Give the payer a file it can defend
Before approving the transfer, name the recipient, the payment type, the UAE activity and the document that supports the classification. Confirm whether the recipient is acting through a UAE office, agent or project. Then record why the amount is or is not attributable to a PE. The approval note can be short. It should still point to the invoice and contract. Put the analysis where the finance reviewer can find it with the payment authorisation.
Keep a copy of the FTA guidance and Article 45 reference used for the conclusion, along with the payment schedule and bank confirmation. If the payment is part of a recurring arrangement, update the review when the scope, location, agent or contract changes. A repeated invoice is not proof that the facts remain repeated. Keep the latest contract version in the same file.
If you are deciding whether to release a large payment today, start with the recipient's operating facts rather than waiting for a tax certificate that the domestic 0% rule does not require. If those facts reveal a PE, escalate the Corporate Tax assessment before treating the payment file as closed.
Show the zero without hiding the second question
The current domestic rate makes the withholding calculation simple. For a qualifying UAE-sourced payment of AED 6,000,000 to a non-resident that is not attributable to a UAE PE, AED 6,000,000 multiplied by 0% equals AED 0 UAE withholding. The source is Article 45 of the Corporate Tax Law and the FTA's withholding guidance. The qualification comes before the multiplication.
The FTA General Corporate Tax Guide gives the contrasting Corporate Tax calculation: on AED 6,000,000 of taxable income, AED 375,000 at 0% is AED 0, and the AED 5,625,000 balance at 9% is AED 506,250. That example shows why withholding and PE profit must sit on separate lines in the review worksheet.
We would record 0% as a domestic withholding conclusion, not as a claim that the foreign supplier has no UAE tax exposure. That wording matters because a later PE finding changes the tax question, while the bank payment itself may still have carried no UAE withholding. Keep the approval note with the invoice and the Article 45 analysis.
Frequently Asked Questions
For treasury and cross-border finance teams.
What is the UAE withholding tax rate?
The UAE domestic withholding tax rate is 0%. UAE-sourced payments to non-residents leave the country without any UAE withholding and with no withholding return to file.
Which payments does the 0% rate cover?
UAE-sourced income paid to non-residents, including dividends, interest, royalties and service fees. Because the rate is already zero, there is no withholding to apply and no certificate to issue.
Does 0% withholding mean no UAE tax at all?
No. The 0% rate is about outbound payments. If the non-resident has a permanent establishment in the UAE, the profit attributable to that PE is taxed at 9% above AED 375,000. Withholding and corporate tax are separate.
Do I need a treaty to get the 0% rate?
No. The 0% rate is domestic, so it applies without a treaty claim. Treaties matter more for reducing foreign withholding tax on flows into the UAE.
Could the withholding rate change in future?
The rate is currently set at 0% domestically. As with any tax setting, confirm the current position against the Federal Tax Authority before relying on it for a large payment.
Can Exiloz confirm our withholding position?
Yes. We confirm whether a payment is in scope, that the 0% domestic rate applies, and whether any PE charge sits alongside it.
Confirm your 0% position
Exiloz confirms the 0% domestic withholding applies and whether a PE charge sits alongside it.