UAE Corporate Tax Landscape in 2025
The UAE's Corporate Tax landscape is undergoing major changes in 2025, which has reshaped businesses' approach to complying with tax regulations and avoiding administrative penalties and legal complications. In this article, let's break down the major updates through simple explanations and real-world examples to help business owners and professionals navigate this new terrain.
Three-Tier Tax Structure
The UAE Corporate Tax Law, Federal Decree Law No.47 of 2022, has structured a progressive tax system
|
Tax Bracket |
Rate |
Who Pays? |
Example |
|
Profit below AED 375,000 |
0% |
Small Businesses and Start-ups |
A grocery making an annual profit of AED 300,00 |
|
Profit above AED 375,000 |
9% |
Most of the Businesses ( Companies) registered in the UAE |
A consultancy firm earning an annual profit of AED 500,000 |
|
Global Revenue of more than Euro 750 million |
15% |
Large Multinational Entities (MNEs) |
International retail chain in the UAE. |
These progressive tax rates ensure that small businesses benefit from tax liability, whereas MNEs are taxed according to global standards.
Natural Person and Free Zone in the Corporate Tax regime
a) Natural person: - No Corporate Tax is applicable on the wages, real estate investment and personal investment, which are done in the personal capacity. All other incomes generated from the UAE are considered business income. Such business income exceeds AED 1 Million Dirhams in a calendar year, the natural person must comply with the Corporate Tax rules.
b) Free Zones: It is a myth that Free Zone companies do not fall under the Corporate Tax Law. The UAE authority has given 0% tax benefits to free zone entities, and those entities must satisfy certain conditions to be eligible for the 0% Corporate Tax. Read more.
Domestic Minimum Top-Up Tax (DMTT)
The DMTT is introduced in the UAE through Federal Decree Law No. 60 of 2023 and applies to multinational entities (MNEs) at the rate of 15% with;
➜ Earning global revenue of 750 Million Euros or more (approximately AED 3.15 billion)
➜ Operating in more than 2 Countries
➜The effective tax rate is below 15% in the UAE
How it works: If an MNE pays 9% Corporate Tax in the UAE, whereas operating in other countries where the tax rates are higher than UAE, such MNEs will be subject to an additional 6% top-up tax in the UAE.
Key Deadlines to Remember
a) Businesses registered in the UAE: Corporate Tax registration must be initiated within 3 months from the date of incorporation to avoid a penalty of AED 10,000.
b) Natural person: - Natural person must register and obtain Tax Registration Number (TRN) once the business income exceeds AED 1 Million in any calendar year. The deadline to register is 31 March of the subsequent year in which the revenue has exceeded.
c) Corporate Tax filing: The businesses must file the Corporate Tax return and pay the taxes, if applicable, within 9 months from the end of the relevant tax year. Read more to understand the common mistakes while preparing and filing the Corporate Tax return.
Reliefs under UAE Corporate Tax Law
Below are the few reliefs under the UAE Corporate Tax Law;
a) Small Business Relief: Businesses that earn revenue below AED 3 million in the current tax year and preceding tax years can elect Small Business Relief and consider the business as having no income to tax. Small Business Relief can be availed only till 31 December 2026. Is this relief is good and to be elected by businesses? Read more before making a decision
b) Carry forward of losses and transfer of losses between the companies: The tax losses can be carried forward for an indefinite period and set off against the taxable income. Subject to conditions, one business can transfer its losses to other businesses and set them off against the profit of the receiving businesses.
c) Qualifying Group Relief: Subject to conditions, the businesses can transfer assets and liabilities between the entities without booking gain or loss on the transfer.
d) Business restructuring relief: In certain situations like merger and acquisitions, spin-off, etc. businesses can elect the Business Restructuring Relief to reduce their tax liabilities.
Smart Dedication to Reduce Corporate Tax
Under Article 28 of Corporate Tax Law, businesses can claim all the expenses which are spent for the business purpose, which is not capital in nature. This includes
➤ Employee benefits, which include salary, bonus, commission etc.
➤ Rent paid for the office space or warehouse
➤ Software subscribed in the business
➤ All types of marketing expenses like Google Ads, trade shows, etc.
Compliance Checklist
➤ Review contracts: Ensure the revenue source and jurisdiction from the revenue is generated through the contracts engaged by the entity.
➤ Separate records and books: Maintain separate accounts for exempt income and taxable incomes.
➤ Documentation: Make sure that all records are kept for a minimum period of 7 years from the end of the tax year.
➤ Software for accounting: In order to generate compliant tax reports, it is highly recommended to use accounting software accredited by the Federal Tax Authority (FTA)
➤ Conduct Health Check: Before submitting the tax return, always consult tax experts and do a health check
➤ Appoint a Tax Agent: It is highly recommended to appoint an official tax agent to handle the tax matters of your business.
Real-Word Scenarios
Case 1 E-Commerce Startup
➤ Annual Profit: AED 400,000
➤ Corporate Tax: 9% of (AED 400,000 - AED 375,000 = AED 25,000) = AED 2,250
➤ Strategy: Invest in assets which can give depreciation expenses of about AED 25,000 or more, which will make the Corporate Tax liability Zero
Case 2 Multi-national entity (Manufacturer)
➤ Global Revenue: 900 Million Euros
➤UAE Profit: AED 10 Million
➤ Regular Tax: AED 866,250
➤ DMTT Impact: Additional 6% Corporate Tax, which is AED 600,000, applicable to meet the global standard
By understanding these changes and planning strategically, businesses can turn tax compliance into a competitive advantage. Need personalized guidance? Our team at Flying Colour Tax Consultant LLC specializes in helping accounting firms adapt to these reforms through automated solutions and regulatory updates.
To learn more about Understanding the UAE Corporate Tax Landscape in 2025, book a free consultation with one of the Flyingcolour team advisors.
Disclaimer: The information provided in this blog is based on our understanding of current tax laws and regulations. It is intended for general informational purposes only and does not constitute professional tax advice, consultation, or representation. The author and publisher are not responsible for any errors or omissions, or for any actions taken based on the information contained in this blog.