Is Your Business Ready for Corporate Tax? UAE Corporate Tax Law Overview 2025

June 19, 2025

The UAE has moved from being almost tax-free to applying full Corporate Tax rules. This change affects nearly every business in the country. Whether you're running a small company or part of a multinational group, 2025 is the year you must be fully ready.

In this guide, we'll explain what Corporate Tax means in the UAE, what your business needs to do, and how to avoid common mistakes.

What Is UAE Corporate Tax?

Corporate Tax is a direct tax on the profits of businesses in the UAE. It became law under Federal Decree-Law No. 47 of 2022. The law applies to any tax period that started on or after 1 June 2023. The goal is to align with international standards and improve transparency.

Corporate Tax Rates for 2025

There are different rates based on the type of income:

For taxable income up to AED 375,000, the rate is zero percent.
For income above AED 375,000, the standard rate is nine percent.
If you are a Qualifying Free Zone Person, you may pay zero percent if you meet all the conditions.
If you are part of a multinational group, you may face a fifteen percent minimum tax starting in 2025 under the Domestic Minimum Top-up Tax rule.

Who Needs to Register and File?

Businesses that must register include:

Companies on the mainland or in Free Zones
Branches of foreign companies in the UAE
Freelancers, sole proprietors, and consultants who earn more than AED 1 million
Some partnerships and foundations, depending on how they are structured

Some entities can be exempt, such as:

Government bodies
Public benefit organisations that are approved
Qualified investment funds
Pension or social security funds
Natural resource businesses that are taxed at the Emirate level

Seven Key Steps to Stay Compliant

Step One: Register for Corporate Tax

All businesses must register through the EmaraTax system. Even if you think you are exempt or below the income threshold, you still need to register. Once registered, you’ll receive a Tax Registration Number. Not registering leads to a fine of AED 10,000.

Step Two: Prepare Your Financial Statements

Your financials must follow IFRS rules. If your revenue is more than AED 50 million, or you are a Qualifying Free Zone Person, your statements must be audited. All records should be kept for at least seven years.

Step Three: Work Out Your Taxable Income

Start with your accounting income. Then adjust it:

Remove exempt income, like certain dividends or foreign branch profits
Add back expenses that are not allowed, such as fines
Limit interest deductions to either AED 12 million or 30 percent of EBITDA, whichever is higher
Consider things like tax losses, group relief, and special adjustments for switching into the tax system

Step Four: File and Pay on Time

You must file your return within nine months after the end of your tax year. For example, if your tax year ends on 31 December 2024, your deadline is 30 September 2025. Your return should include your financial statements, schedules for losses and interest, and details of related party transactions.

Step Five: Follow Transfer Pricing Rules

Any transaction with a related party or connected person must follow the arm’s length principle. You also need to keep a Transfer Pricing Disclosure Form. If your business earns more than AED 200 million, you must also prepare a Master File and a Local File.

Step Six: Qualifying Free Zone Person Rules

To keep your zero percent rate, you must:

Have real economic activity in the Free Zone
Earn income that qualifies, such as from trading with other Free Zone businesses or exports
Keep audited financial records
Make sure no more than five percent or AED 5 million of your income is from non-qualifying activities

If you break any of these rules, your whole income will be taxed at nine percent for five years.

Step Seven: Understand the Top-up Tax for Multinational Groups

If your group earns at least EUR 750 million worldwide, you are part of the global tax rules known as Pillar Two. If your effective tax rate in the UAE is below fifteen percent, you’ll need to pay a top-up tax to make up the difference.

This is called the Domestic Minimum Top-up Tax
It uses rules from the OECD’s global tax framework
There are some exceptions for small amounts of income
You must file a separate return for this tax within fifteen to eighteen months after your tax year ends
Free Zone companies in such groups may lose the zero percent rate if the group’s effective tax rate is too low

Mistakes That Can Hurt Your Business

Thinking Free Zone always means no tax
Missing your registration deadline
Failing to audit financials when required
Ignoring related party transaction rules
Reporting interest or income incorrectly
Believing global tax rules won’t apply if you’re based in the UAE

The Bottom Line

Corporate Tax is now a real part of doing business in the UAE. It’s not something to put off or ignore. Your business must keep proper records, file on time, and have the right systems in place. Whether you are a freelancer or a large company, staying ahead of the rules is a must.

If you’re not sure where to begin, start by checking your compliance against the seven steps above. And if things feel unclear, seek advice early.

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