For most of the last two decades an Emirati company sat at the bottom of a chart with nothing written next to it. There was no federal corporate tax, so the tax questions in the structure arose further up, in the states where the shareholders lived or where the money was eventually spent. A Dutch holding above an Emirati subsidiary was chosen for treaty access, for the credibility of a European parent with counterparties and banks, and for the route it opened into the single market.
That description stopped being accurate in 2023, and the consequences are still working their way through structures designed before it. Federal Decree-Law No. 47 of 2022 imposes corporate tax on financial years beginning on or after 1 June 2023. The rate is low. The regime is not simple, and several of the things a Dutch holding used to do above an Emirati company now have to be argued rather than assumed.
What the law imposes, and on whom
Article 3 of the Decree-Law sets two rates for an ordinary taxable person. Taxable income up to an amount fixed by the Cabinet is taxed at zero per cent, and the excess at nine per cent. Cabinet Decision No. 116 of 2022 fixed that amount at 375,000 dirhams. For a trading company of any size the operative rate is therefore nine per cent, with a first slice relieved.
A free zone company is taxed under a separate clause of the same article. It pays zero per cent on what the legislation calls Qualifying Income and nine per cent on taxable income that is not Qualifying Income. That is a conditional regime, not an exemption, and it turns on a test that many free zone companies do not pass. It is treated in our note on [free zone companies and the qualifying income test](/free-zone-companies-qualifying-income-test/). The point here is narrower: no group should build a structure on the assumption that its Emirati subsidiary pays nothing.
Article 45 imposes withholding tax at zero per cent on the categories of state-sourced income prescribed by the Cabinet. Dividends, interest and royalties therefore leave the Emirates without deduction at source. That has not changed, and it remains one of the more useful features of the jurisdiction.
The participation exemption at the bottom of the chart
Article 23 exempts income from a participating interest. A participating interest is an ownership interest of at least five per cent in the shares or capital of a juridical person, held or intended to be held for an uninterrupted period of at least twelve months, where the participation is subject to corporate tax, or to a tax of similar character under the law of its state of residence, at a rate not less than the nine per cent rate in Article 3. Two further conditions apply. The interest must entitle the holder to at least five per cent of the profits available for distribution and of the liquidation proceeds, and not more than half of the participation’s direct and indirect assets may consist of interests that would not themselves have qualified.
The design is recognizable, and the resemblance to the Dutch participation exemption is close enough that the two can be read side by side. An Emirati company can hold operating subsidiaries and receive dividends and gains without Emirati tax, provided the subject-to-tax condition is met.
What that condition does is exclude a range of subsidiaries that used to be a matter of indifference. A group holding an operating company in a state with no corporate tax, or with a rate below nine per cent, has to test the exemption rather than assume it. Structures assembled when the Emirati parent had no tax base at all were not designed with that filter in mind.
Dividends travelling up to the Netherlands
Where the Dutch company sits above the Emirati one, the flow upward is straightforward and has become no worse. The Emirates deduct nothing under Article 45. At the Dutch end, article 13 of the Wet op de vennootschapsbelasting 1969 applies the participation exemption to a shareholding of at least five per cent of the nominal paid-up capital, so a qualifying dividend from the Emirati subsidiary is left out of the Dutch tax base.
The arrival of a nine per cent Emirati tax has, if anything, made the Dutch side easier. A subsidiary that pays real tax at a real rate is a more comfortable participation to defend than one that paid none, because the anti-abuse and low-taxed-investment provisions around the exemption are aimed at the untaxed case. The Emirati subsidiary now generates a charge that appears in its own accounts and its own return.
The Dutch rates that apply to whatever is not exempt are set by article 22: nineteen per cent on the taxable amount up to 200,000 euro and 25.8 per cent above it, in the version in force from 1 January 2026. Those rates bear on the Dutch company’s own margin, not on the participation income.
Dividends travelling down, and the treaty
The flow in the other direction is where the treaty does its work. The Netherlands levies dividend withholding tax at fifteen per cent under article 5 of the Wet op de dividendbelasting 1965. The treaty between the Netherlands and the Emirates, in force since June 2010, reduces that to five per cent of the gross amount where the beneficial owner is a company whose capital is wholly or partly divided into shares and which holds directly at least ten per cent of the capital of the paying company, and to ten per cent in all other cases. A separate provision reduces the rate to nil for a Contracting State itself, a political subdivision, a pension fund, the Abu Dhabi Investment Authority, the Abu Dhabi Investment Council and comparable government institutions agreed between the competent authorities.
Interest and royalties are treated more generously still. Under the treaty, interest and royalties arising in one state and beneficially owned by a resident of the other are taxable only in that other state. There is no source-state rate at all on either.
That combination is worth stating plainly. Between these two states a properly held shareholding moves dividends at five per cent, and interest and royalties at nothing. The constraint is not the rate. It is whether the recipient can be shown to be the beneficial owner and whether the arrangement survives the anti-abuse tests, which is where files fail.
The Dutch anti-abuse layer, and a list that has changed
Two Dutch measures are relevant to an Emirati group, and one of them has moved in a direction that helps.
The conditional withholding tax under the Wet bronbelasting 2021 applies to interest and royalties, and to dividends, paid to affiliated entities in designated states. Article 4.1 sets the rate at the highest percentage in article 22 of the corporate income tax act, which is 25.8 per cent for 2026. It is not a rate anyone plans to pay; it is a rate designed to stop a payment being made at all.
The states are designated by the Regeling laagbelastende staten en niet-coöperatieve rechtsgebieden voor belastingdoeleinden. In the version in force from 1 January 2026 the Emirates do not appear on either limb of that regulation. Bahrain does, alongside Bermuda, the British Virgin Islands, the Cayman Islands, Guernsey, Jersey and others, and a second limb drawn from the European Union’s non-cooperative list. The nine per cent rate is what keeps the Emirates off it, and that is a direct structural consequence of the 2022 law.
Groups that moved holding functions out of the Emirates in anticipation of the conditional withholding tax should check whether the reason still exists. In several files it does not.
What the Dutch company still has to demonstrate
Removing a jurisdiction from a list does not remove the substance question. The Dutch entity remains subject to the general anti-abuse analysis applied to the withholding exemption and to treaty benefits, and the source state at the other end of any flow applies its own principal purpose test on its own facts.
The questions are the familiar ones. Are the decisions attributed to the Dutch company actually taken there, by directors with the mandate and the information to take them. Does the company have the financial capacity to bear the risks allocated to it. Does the functional description in the transfer pricing file match the board record and the conduct of the business. An Emirati group that treats the Dutch entity as a signing address will not answer those questions well, and the fact that the Emirates now levy a real tax does not assist on that point.
There is a further asymmetry worth naming. Article 18 of the Decree-Law requires a Qualifying Free Zone Person to maintain adequate substance in the Emirates. Where a group runs a Dutch holding above an Emirati free zone company, it has two substance obligations pointing in two directions, and one small management team cannot credibly satisfy both.
Groups above the top-up tax threshold
For larger groups a second layer applies. The Emirati top-up tax reaches constituent entities of multinational groups with annual consolidated revenue of at least 750 million euro in the ultimate parent’s consolidated financial statements in at least two of the four financial years immediately preceding the year in question, for financial years starting on or after 1 January 2025.
For a group in that range the nine per cent rate is no longer the operative number, because the Emirati profit is topped up domestically rather than abroad. The question stops being how to keep the Emirati rate low and becomes where the top-up is collected and by whom. Most family holding structures sit well below the threshold, and for them the nine per cent regime is the whole of the analysis.
Where the Dutch holding still earns its place
The honest summary is that the Emirati corporate tax has removed one argument for a Dutch holding and strengthened two others.
The argument it removed was arbitrage. Where the point of the structure was to sit an untaxed Emirati company underneath a European parent and let the mismatch do the work, that point is gone. The subject-to-tax condition in Article 23 and the participation requirements at the Dutch end both look at real rates now.
The arguments it strengthened are access and durability. A Dutch company gives an Emirati group a treaty network, a directive-based route into European subsidiaries, a corporate form that counterparties and banks understand without explanation, and a jurisdiction whose rulings practice and case law are published. Against a subsidiary that pays nine per cent and files a return, those attributes are easier to defend, because the structure no longer has to explain why nobody is paying anything anywhere.
What has not changed is the requirement that the description be true. The Emirates have acquired a corporate tax, a participation exemption, a substance condition and a return. Each of those is a place where the group’s own file will be read back to it.