The Corporate Tax Environment in UAE in 2025
The Corporate Tax Environment in the UAE in 2025
Businesses’ approach to adhering to tax laws and avoiding administrative fines and legal issues has changed as a result of significant changes to the UAE’s corporate tax environment in 2025. To assist professionals and business owners in navigating this new landscape, let’s dissect the main updates in this post using straightforward explanations.
Free Zones and Natural Persons under the Corporate Tax System
a) Natural Person: Wages, real estate investments, and personal investments made in one’s own right are exempt from corporate tax. Business income includes all other income earned in the United Arab Emirates. When a business’s annual revenue surpasses AED 1 million dirhams, the natural person is required to adhere to the corporate tax regulations.
b) Free Zones: The idea that businesses in Free Zones are exempt from the Corporate Tax Law is untrue. Free zone entities are granted 0% tax benefits by the UAE authority; nevertheless, in order to qualify for the 0% Corporate Tax, these organizations must meet specific requirements.
DMTT, or Domestic Minimum Top-up Tax
Federal Decree Law No. 60 of 2023 established the DMTT in the United Arab Emirates, and it applies to multinational corporations (MNEs) at a 15% rate.
- Making at least 750 million euros (about AED 3.15 billion) in revenue worldwide
- Present in over two nations
- In the UAE, the effective tax rate is less than 15%.
How it works: MNEs who operate in nations with higher tax rates than the UAE but pay 9% corporate tax in the UAE will also be liable to 6% top-up tax in the UAE.
Important Deadlines to Keep in Mind
a) UAE-registered businesses: In order to avoid an AED 10,000 penalty, corporate tax registration must be started within three months of the date of incorporation.
b) Natural person: After their business income surpasses AED 1 million in any given calendar year, a natural person is required to register and get a Tax Registration Number (TRN). Registration must be completed by March 31 of the year after the revenue exceeds that threshold.
c) Filing corporate taxes: Within nine months of the conclusion of the applicable tax year, businesses must file their corporate tax returns and pay any applicable taxes.
UAE Corporate Tax Law Reliefs
a) Small Business Relief: Companies that generate less than AED 3 million in revenue during the current tax year and previous tax years are eligible to choose Small Business Relief, which deems the company to be tax-exempt. The Small Business Relief program is only available through December 31, 2026. Is it good that firms are choosing this relief?
b) Transfer of losses and carry forward of losses: Tax losses may be deducted from taxable income and carried forward for an indefinite amount of time. One company may, with certain restrictions, assign its losses to other companies and deduct them from the receiving companies’ profits.
c) Qualifying Group Relief: Businesses may transfer assets and liabilities between entities without recording a gain or loss on the transfer, subject to certain restrictions.
d) Business restructuring relief: Businesses can choose to lower their tax obligations in specific circumstances, such as spin-offs, mergers, and acquisitions.
Checklist for Compliance
Examine contracts: Verify that the entity’s contracts are the source of revenue and the jurisdiction from which it derives.
Keep distinct books and records: Keep separate accounts for taxable and exempt income.
Documentation: After the tax year ends, make sure that all records are retained for at least seven years.
Accounting software: It is strongly advised to utilize accounting software approved by the Federal Tax Authority (FTA) in order to produce compliant tax reports.
Perform Health Check: Always seek advice from tax professionals and perform a health check before to filing your taxes.
Designate a Tax Agent: It is strongly advised that you designate an official tax agent to manage your company’s tax affairs.
Businesses can use tax compliance as a competitive advantage by comprehending these changes and making strategic plans. Do you require individualized advice? With automated solutions and regulatory changes, our team at IBR Group UAE specializes in assisting accounting firms in adjusting to these regulations.
Schedule a free consultation with one of the IBR Group UAE team advisers to find out more about Understanding the UAE Corporate Tax Landscape in 2025.