Setting up a company in Dubai and residing in Germany - how it works

Aktualisiert: Januar 2026

Imagine if you could enjoy the economic benefits of Dubai without having to give up your residence in Germany. Setting up a company in Dubaiwhile you are not deregister from Germany and stay there is not only possible, but also extremely attractive for many entrepreneurs. Dubai offers a dynamic economy, tax incentives and an international business environment that attracts entrepreneurs worldwide.

However, this step is not without its challenges. The legal and tax aspects of such a venture can be complex, especially since the double taxation agreement between Germany and the United Arab Emirates expired on 1 January 2022. This means that income from your Dubai company may be taxable in both the UAE and Germany.

In this article, we highlight the most important points you need to consider in order to be legally protected in both countries and avoid unexpected tax charges.

Disclaimer: This text does not constitute tax advice and is for information purposes only. No liability is assumed for the accuracy and completeness of the information. Any liability or responsibility claims are excluded. For individual tax questions, please contact a qualified tax consultant.

The most important facts in a nutshell:

🏢 Company in Dubai with residence in Germany: First of all: yes, this is possible, but this does not automatically mean that the company's income is only taxable abroad, e.g. Dubai.

🌍 Double advantages: Setting up a company in Dubai brings significant economic and tax incentives, but requires precise planning in terms of legal and tax regulations.

📑 Choice of corporate form and licensing: The selection of the appropriate company form (e.g. Mainland Company, sole proprietorship, Freezone Company) and correct licensing are essential.

💼 Tax aspects: Dubai is attractive because of the low Corporate income tax (9 %) and the lack of income tax. However, the lack of a double taxation agreement with Germany could pose tax challenges.

🏢 Proof of business activity: It is essential to demonstrate that the main business is actually conducted in Dubai in order to avoid potential tax obligations in Germany.

🔍 Labour regulations in Dubai: Managing directors and employees require valid work visas, and specific local labour laws must be taken into account in the business contracts.

📈 Opportunities and risks: In addition to advantages such as tax relief and strategic location, entrepreneurs must take cultural differences and legal complexities into account in order to be successful.

🛠️ Foundation in Dubai: The steps include choosing the legal form, obtaining a licence based on the business activities and registering the company with the Dubai Economic Development (DED) or in one of the many free zones that offer special benefits.

Basics of company formation in Dubai if resident in Germany

Prerequisites and steps for company formation in Dubai

If you want to set up a company in Dubai, you will benefit from tax advantages and a dynamic economy. Here are the basic requirements and steps:

• Choice of legal formChoosing the right legal form is essential. Popular options include the Limited Liability Company (LLC), sole proprietorship and various types of partnership.
  
• LicensingDepending on your business activity, you will need a specific licence. These can be commercial, industrial or service licences.
  
• RegistrationRegister your company either with the Department of Economic Development (DED) or in one of the many free trade zones that offer special benefits.
  

The following documents are required: Passport copy, business plans, possibly a local service agency for foreign founders.

Legal forms of companies in Dubai

The choice of legal form for your company depends on the type of business activity and your individual needs. Here is an overview of the most common legal forms:

Each of these legal forms offers specific advantages that should match your business objectives and type of activity.

Tax aspects which must be observed:

Tax benefits for entrepreneurs in Dubai

Dubai offers numerous tax advantages that make it a particularly attractive business location. Here are the most important points you should consider:

• No income tax: ATTENTION: If you move your residence to Dubai, you will not be subject to income tax. This can lead to considerable savings and increase your disposable income.

• 9 % Corporate income tax: Companies in Dubai are subject to a corporate income tax of only 9 % for resident companies. For Freezone companies, this tax may even be waived, but this must be assessed on a case-by-case basis. It is best to discuss this with us in a free expert discussion.

This comparative table shows how attractive Dubai can be compared to Germany when it comes to the taxation of income and corporate profits.

Note: The Exit taxation from Germany is also not relevant for you in this case

Double taxation agreement between Germany and the UAE

A critical point when setting up a company in Dubai is the current situation of the lack of a double taxation agreement (DTA) between Germany and the United Arab Emirates. You must take these factors into account:

• Proof of the registered office: Your company must demonstrably have its operational headquarters in Dubai. This avoids the risk of double taxation, as income could otherwise be subject to tax in both Dubai and Germany.
  
• Global income principle: As an entrepreneur based in Germany, you are subject to the global income principle, according to which income earned worldwide is taxable in Germany.
  

It is therefore essential that business operations in Dubai are managed effectively and verifiably in order to avoid tax consequences in Germany. The following list shows you which measures can be helpful to optimise your tax situation:

• Maintain a well-documented business account in Dubai including bookkeeping.
• Hire a managing director in Dubai so that it is proven that the business activities are controlled from Dubai.
• Make sure you have a permanent business address and demonstrable business activities in Dubai.
• Hold regular business meetings in Dubai and document them accordingly.
  

These measures will help you to meet the tax requirements of both countries and minimise your tax burden.

Setting up a company in Dubai and residing in Germany - this is what it could look like:

The situation is as follows: The company in Dubai and its turnover are taxable in Dubai - provided you proceed correctly and the management is located in Dubai (own premises and the shareholder living in Germany is not the managing director). In this case, the Dubai company is protected and there is no taxable permanent establishment in Germany. Only payments made to the shareholder as a profit distribution are taxable in Germany and - like GmbH distributions - are included in the calculation of contributions for voluntary insured persons. Health and long-term care insurance contributions unemployment and pension insurance contributions are not included.

Note: The associated foreign shareholding must be reported to the German tax office. If business is conducted with a German company owned by the Dubai shareholder, these contracts and transactions will certainly be scrutinised more closely.

Also important for future plans: If the shareholder later emigrates, the share in Dubai is subject to exit taxation. If the managing director is resident in Germany, the Dubai company (place of management) is taxable in Germany like a GmbH.

Are you interested in the topic and would like personalised advice? The best way to discuss this with us is in a free expert discussion.

Setting up a company in Dubai and residing in Germany - What is the place of management?

Management is defined as the place where the centre of (business) control is located. The place where these conditions exist is decisive. The administrative centre of the company is irrelevant.

The decisive factor is where the measures necessary for the management of the company are taken and ordered - i.e. where the managing director is based. It is therefore decisive where the management activities are carried out (registered office of the managing director) and where the day-to-day business is conducted. The mere shareholder is not harmful, but a company abroad with a German managing director leads to German tax liability.

The decisive factor is:

• the commercial management of daily life 
• the actual and legal (managing director) actions that are part of ordinary business operations

The following indications are therefore relevant to the decision that no German tax liability arises: 

• Sole or predominant use of locally resident managing directors
• Management meeting exclusively on site and regularly 
• Sufficient documentation of the activity and location (diary, logbook)

In order to avoid a tax liability of the foreign company in Germany, it is important here:

• all contracts concluded by the foreign company are concluded locally (abroad)
• On-site office space (not absolutely necessary, but indicative function)
• Documents are kept on site
• Local telephone connection abroad
• Payment transactions in the foreign country in which the company was founded
• Invoicing abroad
• Computer system on site abroad
• Accounting work

The place of management of the foreign company can therefore be abroad, but the parameters for this must be strictly adhered to. In addition, the increased obligations to cooperate in Germany and the duty of disclosure in Germany must be complied with (a company holding abroad must be reported to the German tax office).

CautionA company abroad can, however, if the above-mentioned indications are fulfilled, also become a Domestic taxation lead, if there is no active income within the meaning of Section 8 I AStG. This applies to domestic parent companies, domestic shareholders, but also to intermediate foreign companies.

• The Add-back taxation is intended to prevent profits from being evaded from taxation in Germany by setting up a company in a low-taxed foreign country.
• It recognises the profits from supply and service relationships of a foreign company that is domiciled in a low-tax country and in which German residents hold a majority interest.
• A distinction is made between passive and active activities in supply and service relationships.
• Only the profit from a passive activity is added to the taxable person's taxable income in Germany and taxed in Germany.
• Passive income is also subject to add-back taxation in Germany if it is generated in a foreign exempt permanent establishment.

If a tax resident establishes or acquires a legal entity abroad, he creates an independent taxable entity there.

The income of this company only has an effect on domestic taxation if it is distributed to the tax resident. The same applies when the investment is sold. In the case of reinvestment, the German tax authorities are left empty-handed.

The Taxation of add-backs under §§ 7-14 AStG is intended to prevent persons with unlimited tax liability from transferring their foreign income to a taxable company domiciled in a low-tax country that is not subject to tax in Germany, thereby realising tax benefits.

The regulations on add-back taxation (Sections 7 et seq. AStG) cover this deferral of taxation under certain conditions. This is done by so-called passive income of the foreign company is directly attributable to the domestic shareholders irrespective of the type of profit appropriation.
Such an addition eliminates the shielding effect of the foreign company from German taxation, as the foreign income is subject to German taxation.

If you want to set up a company abroad, the Add-back taxation must be observed! For some activities that are linked to domestic shareholders, this is ruled out from the outset.

Four conditions must be met for the foreign income to be recognised by the domestic taxpayer:

1. It must be a foreign company.
2. It must be controlled by domestic shareholders.
3. The foreign company must realise income from passive acquisition.
4. Passive income must be taxed at a low rate.

The elements of add-back taxation also affect participations in foreign partnerships or foreign permanent establishments via Section 20 (2) AStG. However, the legal consequence here is a change from the tax exemption actually provided for under the DTA to the tax credit method. 

Information and tips from  - Patric Böhle from BaBo Tax Steuerberatungsges mbH

Residence and labour law

Is residency in Dubai necessary for entrepreneurs?

To set up a company in Dubai, it is not absolutely necessary to live there. You can keep your residence in Germany and still benefit from the tax advantages in Dubai. Here are some important points to bear in mind:

• Business operations in Dubai: Your company must be demonstrably active in Dubai. This means that business activities and decisions actually take place there.
  
• Regular presence: It is advisable to plan regular visits to Dubai in order to personally monitor and document business requirements.
  
• Local registered office: Make sure that your company has a fixed place of business in Dubai that is verifiable as such.
  

Labour law regulations in Dubai

Compared to many other countries, the labour law conditions in Dubai are business-friendly. Here are the most important points to bear in mind:

Work visas

• Visa requirements: Entrepreneurs and their employees require valid work visas, which must be applied for by the company based in Dubai.
  
• Entry and residence: With a work visa, you are authorised to work and reside in Dubai.
  

Table: Visa procedure

• Local laws: Employment contracts must be drafted in accordance with local laws. This applies both to the drafting of contracts and to final provisions such as notice periods and severance payments.
  
• Contract specifications: Detailed job specifications and working conditions should be clearly defined to avoid misunderstandings.

Checklist for employment contracts

• Contract duration
  
• Cancellation rules
  
• Salary agreements
  
• Working hours and overtime regulations

By taking note of this information and adapting your business and legal structures accordingly, you can be a successful entrepreneur in Dubai without having to give up your German residence.

Risks and benefits

Opportunities for company formation in Dubai

Setting up a company in Dubai opens up considerable opportunities that are particularly interesting in terms of profitability and location advantages:

• Tax advantagesIn Dubai, you pay no income or corporation tax. This significantly increases the financial attractiveness of your company.
  
• Strategic locationDubai acts as a global hub with excellent connections to markets in Asia, Europe and Africa, making it an ideal location for internationally orientated business.
  
• Modern infrastructureYou benefit from a state-of-the-art infrastructure and advanced business facilities that enable efficient and effective business management.
  

Possible risks and how to minimise them

Although setting up a company in Dubai offers many benefits, there are also specific risks to consider. Here are the main points with tips on how you can minimise them:

• Legal complexityThe regulations can be very complicated. It is advisable to seek professional legal advice to avoid incorrect configurations.
  

• Lack of double taxation agreementsWithout such an agreement, it is crucial that your company can prove that it operates in Dubai in order to avoid tax disadvantages in Germany.
  

• Cultural differencesIt is important that you familiarise yourself with the cultural customs and business practices in the UAE to avoid potential misunderstandings.
  

Through strategic planning and the use of expertise, you can overcome these challenges and successfully set up your company in Dubai.

Conclusion

If you want to set up a company in Dubai while maintaining your residency in Germany, it is essential that you familiarise yourself with the specific requirements and legal framework. The benefits such as tax relief and strategic positioning in Dubai are tempting, but they require careful planning and regular review of your business activities. Make sure you apply for the necessary work visas and that your contracts comply with local laws. With the right approach and a clear strategy, you can get the best of both worlds: the dynamic business environment of Dubai and the stable quality of life in Germany. Seize the opportunities that present themselves and minimise the risks through sound knowledge and careful planning.

Frequently asked questions:

What does it cost to set up a company in Dubai?

The costs vary depending on your project, the licence, the activities and the set-up you need to be best positioned. In our free initial consultation, we can discuss this in detail and give you a realistic estimate.

Why head office in Dubai?

The main reasons for a company headquarters in Dubai are

• No income tax and very low corporation tax (9 %)
• Strategically favourable location as a trading hub
• Modern infrastructure and international network across all sectors

How much start-up capital for Dubai?

The minimum capital requirements vary, but in most cases a minimum capital contribution is required. Even if you can start with a capital contribution of 0 euros, we recommend a minimum capital contribution of 25,000 euros, similar to a German GmbH.

Does Germany have a double taxation agreement with Dubai?

No, there is currently no double taxation agreement between Germany and the United Arab Emirates (UAE), to which Dubai belongs. This can lead to double taxation if the company does not clearly operate in Dubai.