Holding Company

What a holding company does

A holding company is set up to control assets, not to sell goods or provide services. It may hold shares in operating companies, manage a portfolio of real estate, or retain ownership of intellectual property such as patents or trademarks. In some cases, it’s used as a structure for managing family wealth and succession.

Unlike a trading company, a holding company doesn’t deal with customers, invoices or stock. It doesn’t carry out commercial activity itself. Instead, it owns the companies that do. That setup helps keep assets separate

Where to set up: Mainland, free zone, or DIFC/ADGM

To set up a holding company in Dubai, the first step is choosing the right jurisdiction. The mainland option, through the Department of Economic Development (DED), allows full access to the UAE market but comes with local compliance rules and a 9 percent corporate tax. It may suit holding structures with operational ties to mainland businesses.

Free zones such as DMCC or JAFZA are often used for holding international assets. These zones offer 100 percent foreign ownership, tax benefits, and simplified reporting. They work well for investors managing overseas subsidiaries or property portfolios.

For more complex group setups, private equity structures or family wealth planning, DIFC and ADGM are usually the preferred options. Both apply English common law, allow for nominee arrangements, and support SPVs. They also give access to independent courts. These features make them ideal for holding real estate or cross-border assets and managing succession plans.

Legal structures: LLCs, PJSCs, SPVs

The legal form you choose depends on what you plan to hold and how you want to manage it. Most holding companies in the UAE use an LLC structure. This works well for families or private groups holding shares, real estate, or operating businesses, whether on the mainland or in a free zone.

Larger corporate groups sometimes use a Public Joint Stock Company (PJSC) if they are planning to raise capital in future or need a wider shareholder base.

In DIFC or ADGM, Special Purpose Vehicles (SPVs) are common. They’re often used to ringfence risk, set up nominee ownership, or manage succession planning, and are quick to set up and cost-effective.

Foundations are sometimes added to an SPV structure when there’s a need to plan across generations, especially in family setups where control and continuity are a concern.

Tax and ESR compliance

Holding companies in the UAE fall under the 9% corporate tax if their income goes beyond AED 375,000 and includes anything other than passive earnings. Passive income usually means dividends or capital gains from shares. If that’s all the company earns, and it’s based in a qualifying free zone, it can likely keep the 0% tax rate. But that only applies to what the law calls ‘qualifying income,’ which doesn’t include interest, rental income, or revenue from mainland entities.

Economic Substance Rules (ESR) apply too. A company that only holds equity shares and earns nothing else is classed as a ‘pure equity holding entity.’ That means it only needs to do basic annual reporting, have a UAE presence, and hold its shares properly. If it goes beyond that, by offering management services, holding non-equity assets, or earning other types of income, it must meet the full ESR test. That includes having real activity in the UAE, with employees and local operating costs.

Ownership, control, and asset protection

Many investors use holding companies to keep control over assets while lowering risk. One common use is to hold Dubai property through a structure in JAFZA or DIFC. These zones allow full foreign ownership and make transfers between family members or related entities simpler.

Others use holding companies to split business units so that if one runs into trouble, it doesn’t affect the rest. It’s also a way to set up future ownership plans. SPVs in DIFC or ADGM are often used to pass down shares or real estate, especially where families want to avoid joint ownership or unclear succession.

In more complex setups, some use nominee structures or layered entities. DIFC and ADGM both allow this under common law, which gives more options for indirect control while staying compliant.

Setup requirements and ongoing obligations

You’ll need passport copies, proof of address, and a clear business plan. Most structures require at least one shareholder and a UAE-registered director, even if the company doesn’t trade.

You must report your ultimate beneficial owner (UBO), meet ESR filing duties, and in some cases, prepare audited accounts. SPVs and certain free zone entities may be exempt, depending on their income and asset profile.

Opening a corporate bank account can be a slow process, especially if the company has no physical presence. Visa eligibility also depends on where you register. DIFC SPVs can sponsor residency, while some free zones only offer this if you lease office space or meet specific thresholds.

How can Sovereign PPG help?

Sovereign PPG has extensive experience setting up holding companies across the UAE, including in mainland jurisdictions, free zones, and financial centres like DIFC and ADGM. Our team can advise you on the right structure, handle all legal and regulatory steps, and support ongoing compliance with ESR, UBO and corporate tax requirements.

If you need assistance with setting up a holding company in Dubai or any other related onshore or offshore structuring, asset protection, restructuring or family office matters in Abu Dhabi, Dubai, the wider UAE, Oman, Qatar or KSA, then please do get in touch with us on +971 (0)4 456 1761 for Dubai or +971 (0)2 448 5120 for Abu Dhabi, email us at Dubai@SovereignGroup.com or complete the contact form below and we will be delighted to assist you.