Setting Up a Company in Dubai: Common Questions, Problems, and Misconceptions

PKPI

Setting up a Company in Dubai seems simple, especially because of the low taxes. But it can be hard to avoid UK taxes if you still have ties to the UK. At PKPI Chartered Accountants, we help clients understand the rules, so they don’t get caught by surprise. 

Common Questions, Problems, and Misconceptions  

1. Living in the UK While Running a Company Abroad 

Many believe that simply setting up a business abroad avoids UK tax. If you live in the UK and run a company overseas, HMRC might still tax the company by using something called the Central Management and Control rules. This means your company could be seen as a UK tax resident and may owe UK taxes.  

Tip: For the company to be truly foreign resident for tax, it must be managed and controlled outside the UK.  

2. UK Tax on UK-Sourced Income 

Even if you live abroad, the UK can still tax certain UK income, including:  

• Rental income  

• UK-based trades or self-employment  

• Director’s fees  

• Capital Gains Tax (CGT) on UK property  

3. UK Premises = UK Tax  

If your Dubai-based company trades through a UK office, it might have a UK permanent establishment. This means UK taxes could apply. 

4. Working in the UK 

If you work in the UK—whether as self-employed, an employee, or a company director—you may need to pay UK tax on your income, even if your company is from another country. 

5. UK Company Exit Charge 

If you're planning to move your UK-registered company to Dubai, be aware of a corporate exit charge. This charge applies when a UK company ceases to be tax resident in the UK.  

6. If Your Company Can’t Leave the UK 

If your UK company remains UK-based:  

• It can pay you a salary (subject to PAYE)  

• It can pay for services from abroad, but *only at a fair market rate**. Overpayments won't be tax-deductible. 

7. UK VAT Responsibilities  

Even if you operate from abroad, you may still need to register for UK VAT if selling to UK customers:  

• B2C (Business-to-Consumer): You may need to register and charge UK VAT.  

• B2B (Business-to-Business): The UK buyer may handle VAT under reverse charge rules.  

8. Understanding Non-UK Residency  

Don’t assume you're a non-UK resident. You must:  

• Pass the Statutory Residence Test (SRT)  

• Review the UK-UAE Double Tax Agreement  

• Understand what income (if any) remains taxable in the UK  

9. Temporary Non-Residency Risks  

If your overseas adventure lasts fewer than five UK tax years, you might face a financial surprise. Certain capital gains and income earned during your time away can come knocking when you return home. Be prepared or risk an unwelcome reunion with taxes! 

10. Don’t Move Abroad Just for the Tax 

Yes, Dubai has attractive tax benefits. But don’t move just for tax reasons. Choose a country you want to live in—ideally one that offers both lifestyle and tax benefits.  

11. Inheritance Tax Considerations  

Becoming non-UK resident does not necessarily change your UK domicile status, meaning:  

• You could still be liable for UK Inheritance Tax (IHT) on worldwide assets.  

• It may take several years to lose UK domicile status.  

• Non-UK domiciled individuals are only taxed on UK-based assets for IHT.  

 The complexity of inheritance tax and domicile rules, expert guidance is essential to avoid expensive mistakes and ensure your legacy is protected. 

 How PKPI Chartered Accountants Can Assist You 

At PKPI Chartered Accountants, we understand that starting and running a business overseas—especially in places like Dubai—can be complex due to different tax systems, legal requirements, and cross-border regulations. That’s why our expert international tax team is here to help you navigate every step with confidence. 

We have successfully advised countless UK entrepreneurs and business owners on expanding to the UAE. Our services include: 

• Determining tax residency status 

• Navigating dual tax risks 

• Reducing exposure to UK taxes 

• Structuring both personal and corporate income efficiently 

• Complying with cross-border and local regulations 

• Optimising your operations in the UAE for maximum benefit 

We are proud to be part of a global network of professionals, which allows us to support your business seamlessly in both the UK and Dubai. 

Speak with PKPI  +44 2079 418160 today for personalised advice on how to successfully and tax-efficiently set up your business in Dubai. PKPI provides a Free Consultation 

Establishing a business in Dubai brings enticing tax benefits—but there’s more to it. It’s not merely a matter of registering your company and waving goodbye to UK taxes. To truly reap the rewards, you must reside and work in Dubai, severing vital UK connections—particularly in management, operations, and premises.  

If this isn’t feasible, seeking expert tax advice is paramount. Professional guidance can ensure your affairs are managed legally and efficiently.  

Contact PKPI Chartered Accountants (PKPI provides a Free Consultation) 

📞 Phone: +44 2079 418160 📧 Email: team@pkpi.uk