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25 degrees in December, no personal income tax, efficient administration, and companies incorporated within days. The UAE continues to attract entrepreneurs from around the world.

Many French nationals are drawn to the opportunity. In 2025 alone, nearly 5,000 French citizens relocated to the UAE. However, behind the promise of simplicity lies a significant risk: tax pitfalls that can quickly arise if the project is not properly structured.

Setting up a subsidiary, opening a branch, or relocating permanently to the UAE raises major tax issues, both for the company and its executive , in both jurisdictions. Contrary to common belief, simply incorporating a company in the UAE does not necessarily prevent France from taxing its profits if, in practice, the business is managed from France. Likewise, an executive may continue to be taxed in France even while working in the UAE if their personal or economic ties remain French.

If poorly structured, such a project may result not in tax optimisation, but in double taxation in France and the UAE.

This article provides a practical framework to help you understand these mechanisms and secure your project.

1. Tax Implications at the Executive Level

Determining Tax Residence

The key questions are:

• Where is the executive resident?
• Where will personal income be taxed?

Under French tax law, an individual is considered a French tax resident if any one of the following criteria is met:

• Their household (place of habitual residence) is located in France; or
• Their principal place of stay is in France (more than 183 days per year); or
• Their main professional activity is carried out in France; or
• The centre of their economic interests is located in France (business interests, main income, assets generating revenue, etc.).

These criteria are alternative, not cumulative. Meeting just one is sufficient for French tax residency. In such case, all worldwide personal income is taxable in France, subject to limited exceptions.

If the UAE also recognises the individual as a tax resident under local law (notably through possession of an Emirates ID), the France – UAE Double Tax Treaty applies to determine the country of residence and eliminate double taxation.

Under the treaty, if an individual is deemed resident in both states, residence is determined successively by:

• The location of the permanent home;
• The centre of vital interests (personal and economic ties);
• The habitual place of stay;
• Nationality;
• Mutual agreement between tax authorities (last resort).

These criteria are hierarchical and applied in order.

If the executive’s permanent home is deemed to be in the UAE under the treaty, they will be considered a UAE tax resident exclusively, even if French domestic law would still treat them as resident. In such case, the treaty prevails and France should not tax their personal income.

However, a key difficulty arises: the treaty reserves resident status to persons subject to taxation, and the UAE does not levy personal income tax. On this basis, the French tax authorities may challenge the application of the treaty and continue to tax the individual as a French resident under domestic law.

This creates a real risk of taxation in France.

Taxation of Personal Income

If taxed in France, personal income would be subject to the following rules:

• Dividends: subject to the flat tax (PFU) of 31.4%, comprising income tax (12.8%) and social contributions (18.6%), unless the progressive scale is elected;
• Salaries: subject to progressive income tax, with marginal rates up to 45%, potentially combined with social contributions and reassessment risks in the event of reclassification.

Executives relocating abroad should also be aware of Exit Tax, which applies to unrealised capital gains on shareholdings at the time of departure. The tax is assessed at 31.4% and is deferred, with final relief after:

• 2 years if the value of the shares is below EUR 800,000;
• 5 years if above this threshold.

Practical Risk Scenarios (Executive)

✔ Fully secure

• Executive relocates with family to the UAE;
• No property retained in France;
• Returns to France only briefly (e.g. one month per year);
• Works and earns income exclusively in the UAE.

→ UAE resident under the treaty
→ Non-resident under French law
→ Personal income taxable only in the UAE (except French-source real estate income)

⚠ Risk of requalification

• Family and home in the UAE;
• Rental income and business interests retained in France;
• Frequent trips to France to manage assets.

→ UAE resident under treaty (home criterion)
→ Possible French resident under domestic law (economic interests)
→ Risk of French taxation

⚠ Uncertain situation

• Home in the UAE;
• Property retained in France;
• Professional activity in the UAE.

→ Dual residence under treaty (home criterion)
→ Further criteria required

❌ Taxable in France

• Executive lives in France;
• Works in the UAE occasionally;
• Income paid into French accounts.

→ French resident under treaty and domestic law
→ Personal income taxable in France

Conclusion: Full tax protection is achieved only when the executive is resident in the UAE under the treaty and no longer qualifies as a French tax resident under domestic law.

2. Tax Implications at the Company Level

Determining Corporate Tax Residence

The key questions remain:

• Where is the company resident?
• Where are its profits taxed?

Under French law, a company is considered French tax resident if it has in France:

• Its principal establishment; or
• Its registered office; or
• Its place of effective management.

Effective management refers to where strategic decisions are actually made, including contract execution, banking, board meetings, and accounting oversight.

A company incorporated in the UAE but effectively managed from France may therefore be deemed a French tax resident.

If both countries claim taxing rights, the tax treaty applies. Under the treaty, corporate residence is determined by:

• Tax liability; and
• If both states tax the company, the location of effective management.

This assessment considers where strategic, administrative, and control functions are carried out.

If not connected to France under these criteria, the company will be considered a UAE tax resident.

However, this is not the end of the analysis.

Permanent Establishment Risk

Even if resident in the UAE, profits may still be taxable in France if the company has a permanent establishment there.

A permanent establishment exists if the company has in France:

• A fixed place of business (office, branch, factory, workshop, long-term construction site);
• Operational activities; or
• A dependent agent habitually concluding contracts on its behalf.

Excluded from permanent establishment status:

• Preparatory or auxiliary activities;
• Independent agents acting in the ordinary course of business;
• Mere legal ownership or control.

If a permanent establishment is identified, profits attributable to it are taxable in France.

Taxation of Profits

In France:

• Corporate income tax at 25%;
• Possible penalties (up to 40% for deliberate breach, 80% for fraud);
• Interest for late payment;
• French compliance obligations.

In the UAE:

• Corporate tax at 9%, subject to substance and eligibility requirements, particularly in free zones.

Practical Risk Scenarios (Company)

✔ Fully secure

• Company incorporated and managed in Dubai;
• Local offices and staff;
• No activity in France.

→ UAE resident
→ No permanent establishment in France
→ Profits taxable only in the UAE

✔ Secure structure

• French company with UAE subsidiary;
• Independent management and operations in Dubai.

→ UAE subsidiary taxable only in the UAE
→ Low PE risk in France

⚠ Risk of reclassification

• UAE company managed from France;
• Contracts signed and bank accounts managed in France.

→ Risk of French taxation

❌ Taxable in France

• UAE company with commercial office and sales team in France concluding contracts.

→ French residence or permanent establishment
→ Profits taxable in France

Conclusion: Full tax protection is achieved only when the company is genuinely resident in the UAE and no permanent establishment can be attributed to France.

This article is provided for informational purposes only and reflects legislation in force at the date of publication in both France and the UAE. It does not constitute legal or tax advice, nor a guarantee of outcomes.

Each situation requires a specific analysis, and future changes in French law or evolving UAE jurisprudence may materially affect the conclusions outlined above.

The firm accepts no liability for decisions taken based on this article.
For tailored advice, professional consultation is recommended.

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