The United Arab Emirates (UAE) has transformed its tax landscape in recent years to align with global standards while maintaining its status as a business-friendly hub. For companies operating in the UAE in April 2025, understanding corporate tax obligations is essential for compliance and strategic planning. This blog offers a concise, approachable guide to the key corporate tax information businesses need to know.
The UAE introduced a Corporate Tax (CT) regime effective June 1, 2023, applying to all businesses except those extracting natural resources, which remain under emirate-level rules. The standard rate is 9% on taxable income above AED 375,000 (about USD 102,000), with income below this threshold taxed at 0%. For example, a company earning AED 1 million in taxable profit pays 9% on AED 625,000, equating to AED 56,250. Taxable income starts with accounting profits, adjusted for non-deductible expenses like entertainment costs or fines.
A significant update for 2025 is the Domestic Minimum Top-up Tax (DMTT), effective January 1, 2025, targeting multinational enterprises (MNEs) with consolidated global revenues of €750 million (approximately AED 2.99 billion) in at least two of the prior four years. Under the OECD’s Pillar Two framework, the DMTT ensures these MNEs pay a minimum 15% effective tax rate in the UAE. If a company’s effective rate (after credits or exemptions) falls below 15%, the DMTT “tops up” the difference. For instance, an MNE with AED 500 million in UAE profits at 9% might owe an additional 6% on qualifying income to reach 15%. This applies to financial years starting in 2025, with first filings due by mid-2026 for calendar-year companies.
Free zone businesses enjoy unique benefits. Qualifying Free Zone Persons—entities not transacting with mainland UAE—face a 0% corporate tax rate, even under DMTT rules. However, income from mainland activities or non-qualifying sources is taxed at 9%. Companies can opt out of free zone exemptions to align with global tax obligations, which may simplify compliance for MNEs facing top-up taxes elsewhere. Filing a CT return is mandatory, even for exempt entities, typically due nine months after the fiscal year-end—September 30, 2025, for a December 2024 close.
The Value Added Tax (VAT) at 5% applies to most business transactions, with quarterly filings required for registered businesses exceeding AED 375,000 in annual taxable supplies. Late VAT submissions incur penalties starting at AED 1,000, so use the Federal Tax Authority (FTA) portal for timely e-filing. Zero-rated supplies (e.g., exports) and exempt items (e.g., residential leases) reduce VAT liability, but accurate reporting is critical. Businesses can recover input VAT on eligible expenses, like office equipment, if properly documented.
Excise tax affects companies dealing in tobacco (100%), energy drinks (100%), or sweetened beverages (50%). These are reported separately, with revenue supporting public health initiatives. For example, a beverage distributor pays 50% excise on carbonated drink sales, increasing prices and impacting margins.
New incentives in 2025 include a refundable tax credit for high-value employment, potentially covering 30–50% of salaries for roles like C-suite executives, pending legislative approval. This aims to attract talent and innovation. Small businesses with revenue below AED 3 million can claim Small Business Relief, applying a 0% rate regardless of profit, easing compliance burdens.
Transfer pricing rules require related-party transactions to meet arm’s-length standards, with documentation due 30 days upon FTA request. MNEs with revenues over AED 3.15 billion must maintain a Local File and Master File. Non-compliance risks adjustments and penalties.
File CT returns electronically by September 30, 2025, for a 2024 calendar year, and settle taxes within the same period. Maintain records for seven years to support audits. The FTA’s website offers guides, and businesses should monitor updates, as the DMTT framework may evolve. For complex structures—like free zone/mainland operations—consult a tax expert to optimize strategies. The UAE’s competitive tax rates and incentives keep it a global business leader, but staying compliant in April 2025 ensures your company thrives.
For information on “UAE Corporate Taxes”, contact finnection via email at info@finnection.ae or call us at our toll free number +971 800 0120070
Disclaimer: Above information is subject to change and represent the views of the author. It is shared for educational purposes only. Readers are advised to use their own judgement and seek specific professional advice before making any decision. Finnection is not liable for any actions taken by reader based on the information shared in this article. You may consult with us before using this information for any purpose.