How to structure an international M&A deal through the UAE

Mainstream

Structuring an international M&A deal through the UAE is not just about buying a stake or assets. It is the construction of an architecture that will protect capital, ensure tax efficiency and provide a realistic exit from investment.

The question is not which company to buy. The key question is how to build a legal, tax and regulatory framework that will withstand both the transaction itself and the subsequent ownership of the asset in multiple jurisdictions.

Effective structuring begins with three checks:

• What is the commercial purpose of the acquisition and future exit?
• What jurisdictional instruments of the UAE are optimal for this asset?
• What tax, regulatory and sanction restrictions will arise in the way of the transaction and ownership?

If these three issues are not resolved in advance, the investor risks a legally-mandated but commercially inefficient structure – with excessive taxation, blocked exit, or vulnerability to third-party claims.

When it becomes necessary to structure a transaction through the UAE

Structuring an international M&A transaction through the UAE is in demand if:

• The international investor acquires assets in the MENA region, South Asia, Africa or Europe;
• The family office creates a platform for direct investment.
• Private equity fund forms a holding structure for portfolio companies;
• Shares in companies registered in free zones or on the mainland are acquired;
• The transaction is cross-border and requires neutral jurisdiction for the holding.
• Taxation of dividends, interest and capital gains should be optimized;
• Assets are protected from political or commercial risks;
• future transactions are planned – the attraction of a co-investor, the sale of a strategist or an IPO;
• The structure should take into account the requirements of Shariah, inheritance and family management;
• The asset is related to real estate, infrastructure, technology or natural resources.

The mistake most investors make

Many people start with the question:

Which company to buy a stake in?

That's the wrong first question.

The right question is:

What legal framework would allow you to buy, securely own and exit an asset at minimal cost and risk?

Sometimes the best result is given by the mainland company (Onshore UAE). Sometimes a holding company in the free zone (Free Zone Holding). Sometimes an offshore company combined with an operating structure in the UAE. Sometimes, parallel holdings in several jurisdictions. And sometimes a combination of trusts, funds and corporate instruments.

International structuring does not require the choice of jurisdiction by catalog, but individual design for a specific transaction and future scenarios.

Step 1. Determine the investment goal and exit strategy

Before choosing the jurisdiction and form of the company, it is necessary to fix:

• Type of investor: strategic buyer, financial investor, private equity fund, family office or individual;
• Investment horizon – long-term ownership or planned exit in 3-7 years;
• exit method – sale to a strategist, secondary sale to a financial investor, IPO, buyback by founders or transfer to the next generation;
• decision-making structure – sole control, partnership, co-investment;
• the confidentiality requirements of the ultimate beneficiary;
• the need to attract debt financing at the level of a holding or asset;
• Appetite for tax risks and allowable level of substance requirements.

Without answers to these questions, any corporate decision becomes a set of formalities that may not be useful in a few years.

Step 2. Select a jurisdictional platform: Onshore, Free Zone or Offshore

The UAE offers three fundamentally different pillars for structuring an international M&A deal.

Onshore (mainland company)

It is registered in accordance with the Federal Decree-Law No. 32/2021). Since 2021, 100% foreign ownership in most sectors is allowed, but for strategic industries, the requirement of a local partner remains.

Application: If the asset is located on the UAE mainland, access to government contracts or strategic linkage with the local economy is required.

Free Zone (Free Zone Company)

It is created in one of more than 40 free zones (DIFC, ADGM, JAFZA, DMCC, DWC, RAKEZ, etc.). It offers 100% foreign ownership, zero corporate tax rate for qualifying income (subject to conditions), no exchange controls, and the possibility of repatriation of capital. DIFC and ADGM operate under their own common law, the most commonly used platform for holding and financial institutions.

Application: Holding companies, asset-specific SPVs, private equity platforms and family office.

Offshore (Offshore Company in UAE)

Registered in special offshore registers (JAFZA Offshore, RAK ICC, Ajman Offshore). It is not allowed to operate in the UAE and rent an office within the country. It is used as an international holding company for the ownership of foreign assets, protection of confidentiality and structuring of inheritance.

Application: upper level of holding, asset protection, property ownership outside the UAE, corporate “wrap” for investment in countries with unstable legal environment.

A common mistake is to register a company in an area that is attractive in value but does not match the type of asset and exit plan. A cheap start-up solution is almost always more expensive when trying to sell a business, pass a bank compliance or apply a double taxation agreement.

Step 3. Conduct a comprehensive audit of the asset and compliance environment

Due diligence in the context of a transaction through the UAE should cover both the acquisition object itself and the holding chain.

It is necessary to check:

• Corporate history, signatories’ credentials and capital structure of the target company;
• the presence of encumbrances, options, shareholder agreements and hidden obligations;
• Regulatory status – licenses, permits, restrictions for foreign ownership;
• tax residency of the target company and possible risks of a permanent establishment;
• Compliance with transfer pricing rules and economic presence requirements (ESR)
• employment contracts, visa obligations and pension accruals;
• intellectual property, IT infrastructure and data protection;
• litigation, arbitration proceedings and claims of regulators;
• sanctions and currency compliance, especially if the parties or assets affect multiple jurisdictions.

In the UAE, public registries in a number of zones are limited, so verification often requires active engagement with the target management, requesting documents and engaging local legal advisers.

Step 4. Select the structure of the transaction: Purchase of shares or assets, merger or joint venture

The choice of transaction structure affects taxes, liability, regulatory approvals and the mechanism for transfer of control.

Main options:

• Share Purchase: Purchase shares or shares of the target company. The most common option for an existing business. It requires a thorough check of all the objectives.
• Asset Purchase is the purchase of individual assets. It is often used if the purpose is burdened with significant obligations or if the buyer only needs a portion of the business. May require re-issuance of licenses, contracts and consent of counterparties.
• Merger/Amalgamation – is provided by the legislation of DIFC, ADGM and mainland UAE. Allows universal succession, but requires compliance with the procedures for notifying creditors and approval of the regulator.
• Joint Venture is relevant if you need a local partner or co-investor with special expertise. It can be done through a separate SPV or a contractual partnership.

Choices cannot be made in the abstract. It should take into account commercial logic, the possibility of carrying losses, the tax consequences of transferring assets and the claims of creditors.

Step 5. Assessing the tax implications and using international agreements

Since June 2023, the UAE has been subject to a federal corporate tax at a rate of 9% on profits over 375,000 AED. At the same time, privileges for qualified free zone companies and the possibility of applying double taxation agreements are preserved (the UAE has more than 140 DTAs in force).

When structuring a transaction, it is necessary to analyze:

• Whether the holding company will be subject to corporate tax or qualify as a Free Zone Person with 0% qualifying income;
• how dividends, interest on loans and capital gains qualify in the buyer’s jurisdiction and in the target jurisdiction;
• Whether the withholding tax exemption is applied under the DTA;
• Whether the permanent establishment (PE) is established in the UAE or abroad;
• Whether thin capitalization rules or limits on interest deduction apply;
• There is a risk of CFC (controlled foreign companies) rules being applied in the country of the ultimate beneficiary.

A mistake at this stage could turn a tax-neutral deal into one burdened with unforeseen fiscal losses.

Step 6. Ensure regulatory approvals and antimonopoly compliance

Not every M&A transaction involving the UAE requires prior approval, but under certain conditions, approval is required.

Possible regulatory thresholds:

• acquisition of shares in companies in strategic sectors (defense, energy, telecommunications, finance) – approval of the relevant regulator is required;
• transactions with companies registered on financial platforms (DIFC, ADGM) – may require the approval of the DFSA or FSRA when changing the controlling person;
• Antimonopoly control – from 2024, the UAE has a new federal regime for controlling economic concentration, requiring notification if the threshold values of turnover or market share are exceeded;
• Foreign investment in certain sectors – Restrictions on the list of activities with foreign ownership restrictions remain.

In parallel, it is necessary to assess whether approval of the transaction is required in other affected jurisdictions, for example, when buying an asset in the EU or the United States through a holding in the UAE.

Step 7. Develop financing mechanisms and take into account currency regulation

The structure of funding is as important as the ownership structure.

It is necessary to decide:

• Equity and debt financing ratio at the holding level;
• whether a stock loan will be granted and how it will be documented (compliance with transfer pricing rules, availability of an interest rate at the market level);
• in which currency the claims will be nominated – the UAE dirham is strictly pegged to the dollar, which reduces currency risks, but when cross-border flows with Europe or Asia need analysis;
• restrictions on repatriation of capital (there are no restrictions in the UAE, but they may exist in the country of the asset’s location);
• use of escrow accounts, letters of credit or bank assurances to secure settlements.

The funding structure must withstand not only normal functioning, but also a stress scenario of a dispute with minority shareholders or loss of access to funding.

Step 8. Harmonize dispute resolution mechanisms and applicable law

Each international M&A transaction with an UAE element must have a predetermined dispute resolution mechanism.

The most typical solutions are:

• DIAC, ICC, LCIA or SIAC arbitration is preferred when confidentiality, neutral forum and enforcement under the New York Convention (UAE has been a party since 2006) are required.
• DIFC-LCIA arbitration (currently replaced by DIFC Arbitration Centre) or ADGM Arbitration Centre – convenient if the holding or asset is located in the relevant financial area where English common law applies.
• DIFC or ADGM courts can be chosen as a forum for resolving corporate disputes, especially in transactions structured through these zones.
• UAE State Courts – applicable to local disputes, but not recommended for cross-border transactions with a foreign element due to language barrier (Arabic language of the process) and difficulties with execution of decisions abroad.

In addition to the forum, it is necessary to record the applicable law, the language of the proceedings and the procedure for appointing arbitrators. Violation or inconsistency of the arbitration clause in different documents of the transaction can lead to parallel processes and protracted dispute.

Step 9. Prepare and conclude a package of transaction documents

Documentation of an international M&A transaction structured through the UAE must combine international standards and local requirements.

The package typically includes:

• Share Purchase Agreement (SPA) or Asset Purchase Agreement – the main contract of sale with a price mechanism, assurances and guarantees, obligations to recover losses and deferred conditions;
• Shareholders’ Agreement (SHA) – Shareholders’ Agreement (SHA) – Shareholders’ Agreement governing the management of the company after closing, deadlock, drag-along, tag-along, put and call options;
• Disclosure Letter – a letter of disclosure against assurances and warranties
• Transitional Services Agreement (TSA) – if the seller continues to provide support after the transaction.
• Non-Compete and Non-Solicitation – the obligations of the seller and key managers.
• Financing Documents – intragroup loans, pledges, guarantees;
• Escrow Agreement – if a portion of the price is deposited before certain conditions are met;
• Deeds of Adherence – for future participants.

In the UAE, special attention should be paid to the form of signing (e-signature, legalization, apostille, translation into Arabic for submission to state bodies if necessary) and compliance with the requirements of a particular free zone.

Step 10. Post-closing: Integration, management and compliance with substance requirements

The structuring does not end at the time of closing the transaction.

After closing, it is necessary to:

• to ensure the economic presence (substance) of holding companies in the UAE – a real office, qualified employees, holding the board of directors in the UAE, maintaining accounting records;
• timely submit notifications to regulators about the change of control;
• fulfill the conditions of post-closure - finalization of the price, adjustment of working capital, consideration of claims on guarantees;
• align bank accounts, KYC and compliance policies;
• If necessary, register intragroup loans with the Central Bank of the UAE (if applicable);
• Monitor tax residency and report corporate tax and ESR.

Ignoring substance claims can deprive the holding of tax advantages and lead to the fact that foreign tax authorities do not recognize the company as a resident of the UAE and “break through” it, adding taxes in their jurisdiction.

Onshore, Free Zone or Offshore: What to choose for M&A-holding

The choice is not limited to one criterion. The architecture of the transaction is often arranged in two or three levels: For example, an offshore holding company that owns DIFC, which in turn owns the mainland operating company.

How to strengthen the structure before signing a deal

The best M&A deal is structured at the planning stage, not when the target has been selected and the price has been agreed.

During the design stage, it is necessary to:

• Perform a pre-sale restructuring of a target if it is excessively complex or contains toxic assets.
• Separate the acquired business into a separate company (carve-out);
• Clear the target company of non-operating assets, founder’s personal liabilities and intra-group cross-loans;
• Test the holding chain for the application of DTA and beneficial ownership rules;
• obtain preliminary opinions of tax advisers in the affected jurisdictions (rulings, if possible);
• (b) verify whether the future structure will create a problem with foreign exchange controls or restrictions on foreign investment in the asset’s country;
• Prepare corporate and regulatory cushions, such as pre-clearance and informal consultations with regulators, where appropriate.

The contract and structure should be designed not only for the day of signing, but also for the most difficult scenario – conflict, withdrawal or inspection by the tax authorities.

Common Mistakes in Structured M&A Through UAE

1. Choosing jurisdiction by cost rather than function

The cheapest freezone is rarely the optimal platform for an asset that is scheduled to be sold to an international strategist in three years.

2. Lack of a real economic presence

A substance-free holding is a target for foreign tax claims and denial of DTA.

3. Underestimating the limitations of free zones

A company in the Freezone cannot operate freely on the mainland of the UAE without complying with additional regulations. Direct purchase of the mainland business by a company from the free zone is not always possible without restructuring.

4. Ignoring the rules of inheritance and Shariah

If the ultimate beneficiary is an individual, the structure must take into account the operation of inheritance laws, especially in the absence of a will or a special fund.

5. Weak shareholder agreement or lack thereof

In the UAE, standard corporate regulation does not always cover complex investor agreements. Without SHA, control, exit and deadlock remain unsettled.

6. Closing the transaction without a tax opinion

The UAE is a jurisdiction with developing tax laws. Recommendations three years ago may not be in line with current regulations.

7. Absence of a coordinated arbitration clause

Different transaction documents with different arbitration clauses create the risk of multiple parallel processes.

Investor checklist

Before launching the structuring of an M&A deal through the UAE, 16 questions must be answered:

1. What is the ultimate goal of the acquisition, strategic control or financial investment?
2. Who is the ultimate beneficiary and what are his tax obligations in the country of residence?
3. In which jurisdiction is the target asset located?
4. Does the sector allow 100% foreign ownership in the UAE?
5. Do you need a mainland operating company or a free zone holding company?
6. Is the transaction financed by borrowed funds?
7. What Double Taxation Agreements Are Applicable?
8. Does the target have hidden obligations, litigation, or sanctions risks?
9. Will antitrust approval be required?
10. In which jurisdiction will the withdrawal from the investment take place?
11. Which dispute resolution mechanism is most appropriate?
12. Is the ultimate beneficiary’s confidentiality at the required level?
13. What substance requirements will be presented to the holding?
14. Are minority rights and the deadlock mechanism agreed?
15. How will the issues of inheritance and transfer of control in the family office structure be solved?
16. Which scenario would provide the best protection in the worst case scenario?

What a Strong Structuring Strategy Looks Like

A strong strategy includes five levels:

1. Commercial Architecture

Determination of the commercial objective, investment horizon, management structure and exit plan.

2. Jurisdictional Architecture

Selection of the optimal combination of onshore, free zone and offshore companies, the use of DTA and bilateral investment agreements (UAE has signed more than 100 BITs).

3. Tax & Regulatory Architecture

Modeling of tax flows, checking substance, obtaining conclusions, preliminary approvals.

4. Documentation & Protection Architecture

Formation of a full package of transaction and corporate documentation with assurances, guarantees, options and escrow mechanisms.

5. Post-Closing & Exit Architecture

Integration plan, monitoring regulatory changes, ensuring the structure is ready for sale or IPO, including compliance with transparency and anti-laundering standards.

Without the fifth level, the first four may remain an interesting legal scheme that does not bring realized profits.

FAQ

Why the UAE and not the classic offshores?

The UAE is not a classic offshore. It is a respectable jurisdiction with zero or low taxation, a wide DTA network, a developed judicial and arbitration infrastructure (DIFC, ADGM), a high level of banking services and no blacklisting of the EU and FATF. This allows the UAE to be used as a platform for real operating holdings, not just nominal structures.

Can DIFC be used as a holding company for assets around the world?

Yeah. DIFC is one of the most commonly used platforms for international holdings. It operates on a common law basis, provides access to DIFC Courts and arbitration, is recognized by international banks and investors and meets substance standards.

Is the sale of a stake in the UAE holding taxable?

The sale of a stake in a UAE company by a resident of the UAE is generally exempt from capital gains tax, subject to conditions (in particular, if it is not a trading activity and the interest is not an asset subject to other rules). However, the tax consequences in the country of the buyer or ultimate beneficiary need to be analysed separately.

How does the UAE protect foreign investment?

The UAE provides a stable legal environment, participation in the New York Convention, more than 100 bilateral investment treaties, free repatriation of capital, no exchange controls and special regimes for large investors (e.g. Golden Visa).

Is the structure across the UAE suitable for family offices and private equity?

Yeah. DIFC and ADGM offer special regimes for family offices, private equity funds and management companies. This allows the consolidation of family capital, fund and portfolio management in one jurisdiction with a high level of legal protection.

Should the ultimate beneficiary be disclosed in the UAE?

Yeah, most of the time. Onshore and free zone companies are required to maintain a UBO register and disclose data to the registrar. The offshore companies RAC and Jafza formally have a register, but the information is not publicly available. Bank compliance and international transparency standards require disclosure of the beneficiary to financial institutions.

What are the risks associated with a 9% income tax for holdings?

For qualifying free zone persons, income from ownership of shares, dividends and capital gains may be taxed at a rate of 0%. But it is important to ensure substance, avoid non-qualifying income and annually confirm compliance with the criteria. Non-compliance can result in taxation at a total rate of 9%.

Can a deal be structured if the target has a government contract in the UAE?

Yes, but special attention is required to the rules of change of control, coordination with the state customer, localization requirements (ICV – In-Country Value) and possible restrictions on foreign ownership in the sector.

More importantly: Is it right to choose a zone or make a shareholder agreement?

Both elements are important for long-term success. The wrong zone creates background regulatory and tax risks. A bad shareholder agreement turns these risks into an immediate corporate conflict. Only the combination gives you a protected structure.

Related services

• International M&A, Private Equity & Joint Ventures
• Corporate Structuring, Holding Platforms & Family Office
• UAE Free Zone & Onshore Company Formation
• Tax Structuring & International DTA Planning
• Regulatory Compliance, FDI & Antitrust
• Cross-Border Financing & Banking
• International Arbitration & Corporate Disputes
• Asset Protection & Wealth Planning

Related material

• How to choose a free zone for an international holding in the UAE
• DIFC or ADGM: What is best for structuring M&A and funds
• The UAE Tax Reform: What an International Investor Needs to Know
• Private Equity and Family Office in the UAE: architecture of the investment platform
• How to Create a Shareholder Agreement under DIFC Law
• Enforcement of arbitral awards in the UAE and the MENA region
• How to Protect Foreign Investment with Bilateral UAE Treaties
• Checking the counterparty in the UAE: due diligence and compliance
• Sanctions, Currency Control and International Settlements in Transactions with the UAE

Conclusion

Structuring an international M&A deal through the UAE requires not a mechanical transfer of Western templates to local soil, but strategic design for a specific asset, investor and exit scenario.

The strong architecture is built on the right combination of UAE jurisdictional platforms, rigorous tax analysis, deep due diligence and full transaction documentation that combines international standards with local specifics.

In international M&A, the winner is not the one who closes the deal faster. The winner is the one who, before signing, creates a structure that can withstand both success and crisis – and turn the legal form into real value when exiting.