Corporate tax laws in the UAE are up for some changes. If you have a business in Dubai, then it’s time for you to weigh in on how these may affect you.
The UAE government aims to diversify its revenue and corporate tax in Dubai is a part of that. Calculating the amount of tax you owe has become a bit more difficult now. However, the UAE corporate tax 2025 updates do not in any way harm businesses operating in the Emirates.
As a business owner, you need to understand what the new tax laws mean for your business, and what changes you need to make to reap maximum benefits.
How Corporate Tax Was Implemented in the UAE
Unlike many other countries, the UAE did not impose corporate taxes for decades. Because the government had a constant supply of revenue in the form of Oil trade and tourism. But in June 2023, the government introduced a 9% corporate tax on business profits exceeding AED 375,000.
Over time, new corporate tax laws were introduced to regulate tax compliance, expand tax reporting, and introduce targeted incentives.
Current Corporate Tax Rates and Who Needs to Pay
The standard corporate tax in Dubai remains at 9% for businesses earning more than AED 375,000 annually. However, there are additional updates:
- Small Business Relief: Companies earning up to AED 3 million per year can qualify for 0% corporate tax until December 2026, provided they meet eligibility conditions.
- Free Zone Businesses: Qualifying free zone companies that meet economic substance rules may continue to benefit from 0% corporate tax on eligible income.
- Multinational Corporations: Companies with consolidated revenues above EUR 750 million must comply with the 15% Domestic Minimum Top-up Tax (DMTT) under new OECD-aligned global tax rules.
With these updates, businesses must assess their tax liabilities carefully. Companies that fail to register, file tax returns on time, or comply with reporting requirements face penalties starting at AED 1,000 per month for late filings and AED 10,000 or more for missing records.
All Latest Changes in UAE Corporate Tax Laws for 2025
Domestic Minimum Top-up Tax (DMTT)
The UAE govt implemented a 15% Domestic Minimum Top-up Tax for MNEs with consolidated global revenues of at least €750 million in two of the previous four financial years. The FTA has started collecting DMTT from January 1, 2025. However, DMTT aligns with the OECD/G20’s global minimum tax framework under Pillar Two.
Amendments to Federal Decree-Law No. 47 of 2022
The DMTT mentioned above and some tax incentives to support the business community are all updates to certain provisions of Federal Decree-Law No. 47 of 2022 on the Taxation of Corporations and Businesses by the UAE Ministry of Finance.
Enhanced Transfer Pricing Regulations
In November 2024, the UAE provided further clarity on transfer pricing rules with the release of the Tax Returns – Corporate Tax Guide. This guide outlines the requirements for the Disclosure Form for Related Party and Connected Person transactions. The introduction of the Global Minimum Tax of 15% for large groups emphasizes the need for corporations to ensure their transfer pricing practices are compliant and well-documented.
Tax Incentives for Research and Development (R&D) and High-Value Employment
The UAE govt is also looking to promote innovation and economic diversification, so they’re introducing a set of tax incentives in certain sectors, which have already started rolling out from January 1, 2025:
- R&D Tax Credit: Businesses investing in qualifying Research and Development activities can get a refundable tax credit ranging from 30% to 50%.
- High-Value Employment Incentive: Companies creating high-value jobs in specific sectors are eligible for a refundable tax credit The goal is to attract and retain top talent in the UAE.
Compliance Deadlines for Natural Persons
The FTA has mandated that all natural persons subject to Corporate Tax must submit their Tax Registration applications by March 31, 2025. As of today, the date is around the corner, so hire a top corporate tax service in Dubai. Because failure to comply with this deadline may result in administrative penalties.
List of Qualifying Public Benefit Entities
The FTA released an updated list of qualifying public benefit entities under Federal Decree-Law No. 47 of 2022. These entities are eligible for specific tax exemptions, and the list serves as a reference for organizations seeking confirmation of their tax-exempt status.
Zero-Rate Corporate Tax Benefit for Qualifying Free Zone Entities
The UAE’s Free Zone was famous for its zero-tax policy. Even now qualifying free zone entities that meet some prescribed conditions can still benefit from 0% corporate tax on their eligible income. As always, this tax incentive aims to attract and retain businesses within the UAE’s free zones.
Impact of corporate tax changes on Dubai businesses
These corporate tax changes in Dubai mean that businesses may face challenges in filing their tax. These new corporate tax regulation in UAE makes it necessary for even small businesses to hire a tax expert in Dubai.
Also, the 2025 corporate tax reforms add more compliance and reporting requirements for UAE businesses. You’ll have to submit more detailed financial disclosures, adherence to international tax standards, and real-time submission of tax returns.
So, we advise all businesses to update their accounting systems and train staff to ensure compliance with the new regulations. To keep things easy, you can hire a complete accounting and auditing firm in Dubai, like Reflechir.
