CORPORATE TAX IN THE UAE: EVERYTHING BUSINESSES NEED TO KNOW IN 2025

Corporate Tax in the UAE: Everything Businesses Need to Know in 2025

Corporate Tax in the UAE: Everything Businesses Need to Know in 2025

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The United Arab Emirates (UAE), long known for its tax-free appeal to international investors and entrepreneurs, has introduced a federal corporate tax that took effect on June 1, 2023. As we move through 2025, understanding the UAE corporate tax regime is essential for businesses operating locally or planning to expand into the region. Corporate Tax


Whether you're a multinational, a free zone company, or a startup, this guide will walk you through everything you need to know about corporate tax in the UAE in 2025 — including tax rates, exemptions, compliance requirements, and strategic tips for minimizing liabilities.






What Is Corporate Tax in the UAE?


Corporate tax (CT) is a direct tax imposed on the net profits of businesses. The UAE corporate tax law aims to diversify government revenue, align with international standards, and combat harmful tax practices.


Introduced under Federal Decree-Law No. 47 of 2022, corporate tax applies to business activities across the UAE except for a few exempt categories.






UAE Corporate Tax Rates in 2025


The UAE corporate tax structure is among the most competitive globally, especially when compared to other tax jurisdictions:


























Taxable Income Corporate Tax Rate
Up to AED 375,000 0%
Above AED 375,000 9%
Qualifying multinational groups (under OECD Pillar Two rules) 15% (expected implementation)





Note: The 15% rate applies to multinational entities with consolidated global revenues exceeding €750 million, as per OECD’s global minimum tax.






Who Is Subject to Corporate Tax in the UAE?


The corporate tax applies to most legal entities and individuals conducting business activities in the UAE, including:





  • Mainland companies




  • Free zone entities (with conditions)




  • Branches of foreign companies




  • Freelancers and sole proprietors (if annual profits exceed AED 375,000)







Who Is Exempt?


Certain entities and activities remain exempt from UAE corporate tax:





  • Extractive and non-extractive natural resource businesses (subject to local emirate taxation)




  • Government-owned entities carrying out sovereign or specified activities




  • Public benefit entities (non-profits, charities)




  • Investment funds, under specific conditions




  • Pension and social security funds




  • Qualifying intra-group transactions and reorganizations (conditions apply)







What Are “Qualifying Free Zone Persons”?


Not all free zone businesses automatically enjoy 0% tax. To retain tax benefits, a Qualifying Free Zone Person (QFZP) must:





  • Maintain adequate substance in the UAE




  • Earn Qualifying Income (as defined by Cabinet Decision No. 55 of 2023)




  • Not have elected to be subject to regular CT




  • Comply with transfer pricing and documentation rules




If a free zone entity fails to meet any of these conditions, the 9% rate applies to all income.






Taxable Income: What’s Included?


Businesses are taxed on net accounting profits, after allowable deductions. Taxable income includes:





  • Revenue from goods and services




  • Capital gains




  • Rental income




  • Interest and royalties




  • Other business income




Non-deductible items may include:





  • Dividends received from UAE-resident companies




  • Certain entertainment expenses




  • Penalties and fines




Businesses can also carry forward tax losses for set-off against future taxable income.






Corporate Tax Filing & Deadlines in 2025


All businesses subject to CT must register with the Federal Tax Authority (FTA) and obtain a Tax Registration Number (TRN).


Here’s what you need to know about filing in 2025:





  • Registration Deadline: Depends on license issuance month (as per FTA schedule)




  • Tax Period: Typically aligns with the financial year (e.g., Jan 1 – Dec 31)




  • Tax Return Filing: Must be submitted within 9 months after the end of the financial year




  • Payment: Due on the same date as return submission




Example: For the financial year ending Dec 31, 2024, the corporate tax return and payment are due by Sep 30, 2025.






Transfer Pricing Compliance


Transfer pricing (TP) rules are mandatory in 2025 for all entities transacting with related parties.


Key requirements include:





  • Maintaining TP documentation (Master File and Local File)




  • Applying the arm’s length principle




  • Disclosing related party transactions in the CT return




This is particularly important for groups with cross-border operations or free zone-mainland structures.






Administrative Penalties and Audits


The FTA has outlined strict penalties for non-compliance with corporate tax laws, including:





  • Late registration: AED 10,000




  • Late filing of tax return: AED 1,000 (and increasing for repeated offenses)




  • Underpayment or incorrect filing: Up to 200% of the unpaid tax




Additionally, businesses should prepare for FTA audits and keep robust documentation, including accounting records, invoices, and transfer pricing files.






Preparing Your Business for Corporate Tax in 2025


To stay compliant and optimized under the new tax regime, businesses should take the following steps in 2025:



✅ 1. Register Early with the FTA


Avoid late penalties by completing your corporate tax registration on time via the FTA’s EmaraTax portal.



✅ 2. Reassess Your Business Structure


Review whether your entity qualifies for free zone incentives, tax grouping, or restructuring benefits.



✅ 3. Maintain Proper Books and Records


Ensure accounting practices comply with International Financial Reporting Standards (IFRS) and are audit-ready.



✅ 4. Understand Transfer Pricing Rules


Evaluate related party transactions and pricing policies to ensure they meet TP compliance standards.



✅ 5. Train Your Finance Team


Invest in corporate tax training or consult with tax advisors to build internal expertise and avoid errors.






Strategic Tax Planning Tips


Even with a low 9% rate, businesses can benefit from proactive tax planning:





  • Use tax grouping: Group entities may consolidate profits and losses under certain conditions.




  • Leverage exemptions: Maximize qualifying income in free zones.




  • Plan dividends wisely: Dividends between UAE companies are tax-exempt.




  • Time asset sales: Align capital gains realization with tax planning.




  • Document everything: A robust paper trail supports compliance and audit readiness.







Future Outlook: What’s Next for UAE Corporate Tax?


In 2025 and beyond, expect further developments:





  • Implementation of OECD Pillar Two for global minimum tax (15%) for MNEs




  • Possible sector-specific incentives or amendments




  • Enhanced digital integration with the EmaraTax portal




  • Increased audit activity from the FTA




As the system matures, tax planning will become a core function in business strategy across the UAE.






Conclusion


The introduction of corporate tax in the UAE marks a significant evolution in the country's economic policy. For businesses operating in or entering the UAE in 2025, staying informed and compliant is no longer optional — it’s essential.


By understanding the current tax landscape, registering with the FTA, and proactively managing tax obligations, businesses can minimize risks, optimize financial outcomes, and remain competitive in the region’s dynamic market.


Need expert help navigating corporate tax in the UAE? Partner with a certified tax advisor or enroll in a professional training course to ensure your business stays ahead of the curve.

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