The Challenge
"Between IRES at roughly 24% and IRAP layered on top, our combined corporate rate lands near 27.9% — and once I actually pay myself a dividend, another 26% withholding tax bites, so almost 45% of what my company earns never reaches me personally."
For Italian entrepreneurs and SMEs, this isn’t a hypothetical. Italy’s IRES plus IRAP structure pushes headline corporate tax to roughly 27.9%, with no dedicated SME or startup rate to soften the load for smaller businesses. Add a 26% withholding tax on outbound dividends and corporate capital gains taxed at roughly 24% (even with 95% participation exemption relief in some cases), and the total tax drag on getting profit from the company into an owner’s pocket reaches approximately 44-45%. Annual compliance is rated very high, and the double-tax treaty network sits at around 100 agreements.
Our Approach
- Headline rate gap — Italy's ~27.9% (IRES+IRAP) versus the UAE's 9%, with 0% on profits up to AED375k
- Owner take-home — getting profit to an individual owner costs ~44-45% in Italy (corporate tax plus 26% dividend withholding) versus ~9% in the UAE, or 0% under Free Zone/Small Business Relief
- Dividend withholding — Italy withholds 26% on outbound dividends; the UAE withholds 0%
When we evaluate a move for an Italian business owner, we don’t just compare headline rates — we walk through Small Business Relief eligibility (revenue under AED3m), whether the qualifying activity fits a Free Zone’s 0% regime, the right licence structure (mainland versus free zone), and the substance and residency requirements that any credible relocation demands, plus VAT, payroll and compliance obligations from day one.
The Result
For a business relocating its operating structure to the UAE, the position is straightforward: 9% corporate tax with 0% on the first AED375k of profit, and 0% entirely if the business qualifies for Small Business Relief (revenue under AED3m) or sits within a Qualifying Free Zone. There’s no withholding tax on dividends, 0% capital gains under the participation exemption, and annual compliance is rated low against Italy’s very high burden. Large multinational groups above the €750m Pillar Two threshold face a 15% domestic minimum top-up tax in the UAE, matching Italy’s own 15% Pillar Two position — so the UAE’s advantage is squarely for owner-managed and mid-sized businesses, not for shifting large multinational profits.
The Takeaway
"The UAE's tax numbers are real, but relocating a business isn't a spreadsheet exercise — substance, residency and the right licence structure have to be right before the 9% (or 0%) actually applies to you."
