From Vienna to Dubai: Strategic Use of Austria’s Double Taxation Agreement – Practical Tax Planning Between the EU and Asia

Before I show you the concrete options between Vienna and Dubai, I want to clear up a dangerous misconception:

Every day I meet entrepreneurs who ask: Richard, can I just move to Dubai and pay no taxes anymore?

Heres the truth:

The double tax agreement between Austria and the UAE is not a free pass. It’s a precise legal instrument that needs to be used correctly.

Let’s call it what it is:

A poorly thought-out move to Dubai can end up costing you more than staying in Vienna. But a professionally structured strategy? That can save you six-figure amounts in the long run.

The details matter.

That’s why today, I’m taking you on a practical journey through Austrian-Emirati tax law. Not as a theoretical advisor, but as someone who implements these structures for clients every day.

The best part? You’ll learn not just about the advantages, but the risks too. That way, you’ll make the right decision for your unique situation.

Ready? Then let’s take a look together at your options between Vienna and Dubai.

Yours, RMS

The Austria-Dubai Double Tax Agreement: Understanding the Basics

The double tax agreement between Austria and the United Arab Emirates has been in effect since 2005. That means it’s stood the test of nearly two decades and offers legal certainty.

But what does that mean for you, in concrete terms?

What the DTA Actually Means for You

A double tax agreement determines which country has the right to tax certain income. It also ensures you don’t pay taxes on the same income in both countries.

The Austria-UAE DTA follows the OECD model treaty. This guarantees clear rules for:

• Tax Residency: Where are you liable to pay tax?
• Withholding Tax: Which country taxes which type of income?
• Avoidance of Double Taxation: How are already paid taxes credited or offset?
• Information Exchange: What do the tax authorities share?

Heres where it gets interesting: The UAE introduced a 9% corporate tax in 2023. So the DTA is more relevant today than ever.

Overview of the Most Important Types of Tax

Let’s look at the different categories of taxes the DTA covers:

This table makes one thing clear: Structure makes all the difference. An Austrian GmbH with a Dubai subsidiary pays just 5% withholding tax on dividends.

When Does the DTA Apply – and When Does It Not?

The DTA only applies if you are tax resident in one of the two countries. This is where the first big stumbling block lies.

Tax residency in Austria exists if you have:

• A residence or habitual abode in Austria
• The “center of vital interests” in Austria
• More than 183 days’ presence in Austria per year

Tax residency in Dubai/UAE is achieved by:

• Residence visa (Golden Visa, Investor Visa, etc.)
• Actually spending at least 90 days in the UAE per year
• Proof of economic substance

Additionally, the DTA does not apply to shell or “letterbox” companies. Since 2023, the UAE require true economic substance.

In plain language: Your Dubai company needs office space, local staff, or at least ongoing business activity on site.

Tax Planning Vienna-Dubai: Your Practical Options in Detail

Now it gets interesting. Here, I’ll show you the practical structures you can use.

But beware: Every structure has pros and cons. That means you need to find the right solution for your situation.

Residency Strategies between EU and UAE

The bedrock of any international tax planning is your personal tax residency. Here you have several options:

Option 1: Complete Relocation to Dubai

You give up your Austrian residency and become a tax resident in Dubai. That works if:

• You spend at least 183 days per year in the UAE
• Your center of life truly moves to Dubai
• You hold a valid residence visa

Advantage: Complete exemption from Austrian income tax on foreign income. Disadvantage: You give up EU advantages and truly have to move for the long-term.

Option 2: Dual Residency with Tie-Breaker

You maintain ties to Austria but also establish residency in Dubai. The DTA then uses tie-breaker rules to determine your tax residency.

The order of criteria:

1. Permanent home
2. Center of vital interests
3. Usual place of abode
4. Nationality

This strategy requires careful planning. You’ll also need to document where your real center of life is.

Option 3: Austrian Residency with Dubai Structure

You remain an Austrian tax resident but structure your business via Dubai. This can be advantageous for certain types of income.

Setting Up a Business in Dubai with Austrian Base

Here are the most popular setups between Vienna and Dubai:

Dubai Mainland Company

A Limited Liability Company (LLC) in Dubai Mainland offers maximum flexibility. You can:

• Own 100% as a foreigner
• Do business in the UAE and internationally
• Benefit from the 9% corporate tax (applies above 375,000 AED profit)

Costs: Around EUR 8,000–12,000 for set-up and the first year. Ongoing costs about EUR 4,000–6,000 yearly.

Dubai Freezone Company

Freezone companies offer special advantages:

• 0% corporate tax on strictly Freezone activity
• Simplified accounting and compliance
• Sector-specific licenses available

But be careful: Business with UAE Mainland or abroad is subject to the 9% tax.

Holding Structure via Dubai

A particularly elegant solution is a Dubai holding company with Austrian subsidiaries:

This structure works especially well for entrepreneurs with an established Austrian business.

Optimally Structuring Dividends and Interest Earnings

The DTA makes attractive provisions for passive income. Here are the actual numbers:

Optimizing Dividends

Where shareholdings exceed 10%, only 5% withholding tax applies. Specifically:

Example: EUR 100,000 in dividends from an Austrian GmbH to a Dubai holding company

• Austrian withholding tax: EUR 5,000 (5%)
• Dubai corporate tax: EUR 0 (under the exemption threshold)
• Total burden: 5% instead of 27.5% capital gains tax in Austria

Savings: EUR 22,500 per each EUR 100,000 dividend.

Structuring Interest Income

Interest payments are also subject to only 5% withholding tax. You can use intercompany loans:

Austrian GmbH pays interest to a Dubai company:

• Tax-deductible in Austria: 25%
• Withholding tax: 5%
• Net effect: 20% tax savings

Important: The interest rates must be at arm’s length, i.e., at market rates between unrelated parties.

Austria-UAE DTA: Pitfalls and Compliance Requirements

Now we come to the crunch points. Here it’s decided whether your structure holds up or leads to problems.

Let me be frank: The days of simple Dubai structures are over. Both Austrian and Emirati authorities are taking a closer look.

Properly Proving Substance in Dubai

Since 2023, the UAE require economic substance from all companies. In practice, that means:

Minimum Requirements for Economic Substance:

• Qualified Activities: Genuine business activity on site
• Core Income Generating Activities: Value creation must take place in Dubai
• Adequate Number of Employees: Sufficient qualified staff
• Adequate Expenditure: Adequate expenses incurred in the UAE
• Physical Presence: Actual premises and offices

What does this mean in practice?

For a pure holding company, minimum requirements may suffice. But for operational business, you need real substance.

Practical Substance Checklist:

• Offices with at least 1–2 workstations
• Local management or qualified employees
• Board meetings and business decisions held in Dubai
• Documentation of value-adding activities
• Bank accounts and actual operations in the UAE

Expect annual costs of EUR 20,000–40,000 for actual substance.

Austrian Reporting Obligations with a Dubai Structure

Even if you relocate to Dubai, your Austrian reporting obligations may continue. Many overlook this.

Important Notifications:

1. Relocation notification: When giving up Austrian residence
2. Ownership notification: If holding over 25% in a foreign company
3. CRS notification: Automatic exchange of information between UAE and Austria
4. Hidden profit distribution: If transactions are not at arm’s length

There’s also a ten-year clawback period for certain matters. That means Austria can still follow up years later in some cases.

Documentation requirements:

Maintain meticulous records of:

• Days spent in each country
• Business decisions and their location
• Assets and their developments
• Permanent establishments and their substance

Common Mistakes and How to Avoid Them

From my own practice, here are the costliest mistakes I see:

Mistake 1: Lack of Substance in Dubai

Problem: Letterbox company with no real business activity
Solution: Build genuine substance from the start, even if more expensive

Mistake 2: Unclear Tax Residency

Problem: Not clearly resident in any one jurisdiction
Solution: Make a definite decision for one tax residency

Mistake 3: Neglecting Austrian Reporting Obligations

Problem: Fines and back taxes due to missed reports
Solution: Systematic compliance from day one

Mistake 4: Non-arm’s-length Transfer Pricing

Problem: Profit shifting is treated as hidden profit distribution
Solution: Professional transfer pricing documentation

The most important point: Get professional advice from the outset. The cost of proper structuring is a fraction of possible tax penalties later.

International Tax Structuring EU-Asia: Combination Strategies

This is where things get really interesting. Dubai is not just a destination—it can be your gateway to other markets.

That means you use Dubai as a bridge between Europe and Asia. And the UAE’s DTA network is impressive.

Using Dubai as a Gateway to Other Markets

The UAE has signed over 90 double tax agreements. That makes Dubai the perfect hub for international business.

Especially attractive DTA partners of the UAE:

Imagine: You have a Dubai holding company owning interests in Singapore, Switzerland, and India. The tax burden on dividends is a maximum of 10%.

Practical Example of a Gateway Structure:

An Austrian entrepreneur sets up a Dubai holding that owns the following subsidiaries:

• Singapore: Software development for the Asian market
• Switzerland: IP holding for licenses
• Austria: EU sales/distribution

Result: Optimal tax structuring for every market while being fully legally compliant.

The Cyprus-Dubai Structure for EU Advantages

An elegant solution combines Cyprus’s EU advantages with Dubai’s Asian gateway role.

Why Cyprus-Dubai Works:

• Cyprus: 12.5% corporate tax, EU directives apply
• Dubai: 9% corporate tax, gateway to Asia
• DTA between Cyprus and UAE: 0% withholding tax on dividends

The structure looks like this:

Advantages of this structure:

• EU Parent-Subsidiary Directive: 0% withholding within the EU
• Cyprus-UAE DTA: 0% withholding on profit distributions to Dubai
• Flexible options for future expansion

Disadvantages: Greater complexity and higher compliance costs.

Timing and Sequence of Implementation

The order of your steps determines the success or failure of your international setup.

Phase 1: Preparation (Months 1–3)

1. Tax and legal review of your current situation
2. Define goals and plan structure
3. Apply for Dubai residence visa
4. Prepare for bank account opening

Phase 2: Setting up the Structure (Months 4–6)

1. Company formation in Dubai
2. Open bank accounts
3. Start implementing substance measures
4. Establish accounting and compliance

Phase 3: Migration (Months 7–12)

1. Gradually relocate business activity
2. Adjust personal residency
3. File Austrian reporting
4. Optimize and fine-tune structure

Important: Don’t rush. Coordinate every step with your tax advisor.

Timing tip: Start planning at least 12 months before executing. That gives you plenty of time for formalities and reduces tax risks.

Austria Dubai Taxation: Concrete Calculation Examples

Now let’s run the numbers together so you can see what a Dubai structure brings in different situations.

I’ll show you real-life scenarios with actual figures. So you’ll see in black and white whether the effort is worth it for you.

Sole Proprietor with a Digital Business

Starting point:

Sarah, 34, runs a successful online marketing business. Annual revenue: EUR 400,000; profit: EUR 200,000. Currently a sole proprietor in Austria.

Tax Burden in Austria:

Dubai Structure: LLC with Freezone License

Sarah establishes a Dubai LLC in a Freezone and relocates her business entirely.

Additional Costs of the Dubai Structure:

• Company formation: EUR 10,000 one-off
• Ongoing costs: EUR 15,000 per year (license, visa, accounting)
• Living expenses: Comparable to Vienna

Savings in the first year: EUR 89,000
Savings from the second year onwards: EUR 99,000 per year

Return on investment: The structure pays for itself after just 2–3 months.

GmbH Owner with Property Portfolio

Starting point:

Michael, 45, owns an Austrian GmbH with EUR 300,000 annual profit. He also holds a real estate portfolio worth EUR 2 million.

Current Tax Burden:

Dubai Holding Structure:

Michael sets up a Dubai holding company, which acquires his Austrian GmbH. The real estate remains in Austria (since it’s located there).

Optimized Tax Burden:

The savings seem small, but: Michael can now reinvest in a tax-optimized way and has access to Asian markets.

Holding Structure for Multiple Lines of Business

Starting point:

Elena, 41, has three separate business lines:

• Software company (Germany): EUR 500,000 profit
• Consulting firm (Austria): EUR 200,000 profit
• Online shop (EU-wide): EUR 300,000 profit

Multi-tier Holding Structure:

Total Tax Burden on the Optimized Structure:

• Local taxes: EUR 236,250
• Withholding tax: EUR 25,063
• Dubai tax: EUR 66,527
• Total: EUR 327,840 (32.8%)

Comparison with a Purely German Holding Structure:

With a purely German structure, Elena would pay about 45% total taxes—roughly EUR 450,000 in tax.

Annual savings: EUR 122,160

In addition, Elena now has optimal access to all key markets and can expand flexibly.

Important note: These calculations are simplified. Actual tax liability depends on many individual factors and regulations change regularly.

Always have any structure checked by professionals before implementation.

Frequently Asked Questions

Can I simply move my Austrian GmbH to Dubai?

No, a direct relocation is not possible. You must set up a new company in Dubai and then transfer assets or establish a holding structure.

How long do I have to live in Dubai to benefit from tax advantages?

For tax residency in the UAE you must spend at least 90 days per year there and hold a valid residence visa. To apply the DTA, what matters is where your real center of life is.

What does a Dubai structure realistically cost?

Setup costs: EUR 8,000–15,000. Ongoing costs: EUR 15,000–40,000 per year, depending on complexity and desired substance. Plus advisory costs for setup and ongoing compliance.

Does the DTA also apply to cryptocurrencies?

The DTA treats cryptocurrencies depending on their categorization as capital gains or business income. Each case needs separate review.

Can I, as an Austrian citizen, simply move to Dubai?

Yes, but you need a residence visa. Options include investor, employment, or golden visa. The requirements and costs vary by visa type.

What happens if there is a tax audit in Austria?

If you have proper documentation and real substance in Dubai, your structure is legally secure. Complete documentation of all business decisions and stays is crucial.

What about automatic information exchange?

The UAE has exchanged information with Austria since 2018. That means: transparency is a must. Hiding assets no longer works—but properly set up structures do.

Is Dubai worthwhile for less than EUR 100,000 profit?

If profit is less than EUR 100,000, costs are usually higher than the savings. Your profit should be at least EUR 200,000 to justify the effort.

Can I bring my family with me?

Yes, most residence visas allow you to sponsor your spouse and children. There are good international schools for kids in Dubai, but fees can be high.

What about social security?

Your social security obligation in Austria ends when you move away. There’s no social security system in the UAE as in Europe, so you should consider private health and pension insurance.