Dubai offers numerous economic advantages. Being able to take advantage of these benefits while maintaining residency in Germany sounds appealing. For many entrepreneurs, this presents lucrative opportunities. However, taking this step also comes with some challenges. We’ll explain the legal and tax requirements you need to be aware of.

Do business owners have to live in Dubai as well?

If you want to start a business in Dubai, you don’t necessarily have to live there permanently. So it is possible to start a business in Dubai while maintaining your residence in Germany.

There are a few points to keep in mind:

  • Company in Dubai: The company must be verifiably located in Dubai. Business decisions and activities must definitely originate in the Emirates.
  • On-site Presence: Anyone setting up a company in Dubai should also spend time in the emirate on a regular basis. An on-site presence is important for gaining insight into business operations and for documenting—or, if necessary, optimizing—workflows on the ground.
  • Headquarters in Dubai: It must be possible to prove without any difficulty that the company’s headquarters are located in Dubai.

Starting a Business in Dubai While Retaining Residency in Germany: The Requirements

To set up a company in Dubai, there are a few requirements:

  • Select a legal structure: Before starting a business, you must choose the appropriate legal structure. In addition to a sole proprietorship, the limited liability company (LLC) is a popular legal structure.
  • Obtaining Licenses: Business operations may only begin once specific licenses have been obtained. These may include licenses for commerce, industry, or services.
  • Complete registration: The company must be registered with the Department of Economic Development (DED) or in one of the numerous free trade zones.

Company in Dubai, Residence in Germany: What Legal Structures Are Available?

The legal structure a company should adopt depends on its specific needs. We would like to provide you with a brief overview of the most common legal structures.

Limited Liability Company (LLC)

This legal structure can be established quickly; two to three days on-site are sufficient. A managing director is required. Shareholders may be appointed. The licensing fees amount to approximately 3,500 euros. The company is required to maintain accounting records. Total costs are expected to range between 7,000 and 12,000 euros.

Sole Proprietorship

Foreign nationals who wish to establish a sole proprietorship in Dubai must have a local service agent. In most cases, no initial capital is required. Provided the company meets the necessary qualifications, free zone companies are not subject to taxes. Accounting is mandatory.

Freezone Company

The company formation process can be completed within three days. Licensing fees depend on the choice of free zone and the nature of the business. The costs range from approximately 5,000 to 10,000 euros.

Company in Dubai, Residence in Germany: Saving on Taxes Made Easy

Dubai is an extremely attractive business location. Company founders benefit from numerous tax incentives.

  • Income Tax: There is no income tax in the United Arab Emirates; however, to take advantage of this tax benefit, company founders must relocate their residence to the United Arab Emirates to avoid double taxation in Germany.
  • Corporate Income Tax: Companies in Dubai are subject to corporate income tax. The rate is nine percent. In some cases, companies in free zones may be exempt from this tax. These are decided on a case-by-case basis.

What role does the double taxation treaty between Dubai and Germany play?

Starting a company in Dubai while maintaining residency in Germany. An enticing and lucrative prospect. However, one factor plays a significant role here: Currently, there is no double taxation treaty between Dubai and Germany. The agreement was not renewed in 2021. At the time, Germany had spoken out against continuing the agreement. Double taxation treaties are concluded to prevent income earned abroad from also being taxed in Germany.

Anyone who starts a business in Dubai and retains residency in Germany is automatically subject to the worldwide income principle, which stipulates that income earned abroad must be taxed in Germany.

To minimize the tax burden, the following measures are recommended:

  • Proof of business operations in Dubai must be provided.
  • Care must be taken to ensure that business activities are adequately documented.
  • If a local managing director is hired, it can be demonstrated that business operations are managed from Dubai.
  • The company needs a permanent business address.
  • The German managing director should be on site more often and hold regular business meetings, which should then be properly documented.

These measures will address the tax challenges faced by both countries and reduce the tax burden.