UAE Corporate Tax Update 2025

For years, businesses in Dubai have enjoyed one of the world's most tax-friendly environments, making the UAE a global hub for entrepreneurship, investment, and corporate expansion. However, as economies evolve and global tax frameworks tighten, the UAE is aligning with international tax standards—marking a significant shift for businesses operating in the region.

Since 2024, businesses in the UAE have been adapting to new corporate tax regulations—starting with the introduction of a 9% tax on taxable profits above AED 375,000. In 2025, the rollout continues with the implementation of a 15% Domestic Minimum Top-Up Tax (DMTT) for multinational enterprises (MNEs).  

 While these changes are designed to boost transparency, increase compliance, and align with OECD’s global tax framework, they also introduce new challenges for businesses tackling tax obligations in Dubai.

With strict compliance deadlines, tax exemptions for free zones, and new incentives for research & development (R&D) and high-value employment, companies must reassess their tax strategies and ensure full compliance to avoid penalties. Whether you're a startup, a free zone company, or an MNE operating in the UAE, understanding these updates is critical for staying ahead.

In this post, we’ll explain everything you need to know about the 2025 UAE corporate tax update, including who is affected, key deadlines, and strategies for compliance.

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Corporate Tax in the UAE: What’s Changing in 2025?

The UAE’s 2025 corporate tax updates mark a pivotal shift in the region's tax policies, aligning with international tax standards. As part of the tax increase in Dubai and across the UAE, these changes introduce new tax rates, compliance obligations, and incentives, impacting businesses across various sectors.

Understanding these updates is crucial to ensuring compliance and optimising tax strategies.

Introduction of the 9% Corporate Tax

The most significant tax increase in Dubai and the UAE is the introduction of a 9% corporate tax, which applies to businesses operating in the UAE with taxable profits above AED 375,000. This tax was first introduced in June 2023, and businesses began formal tax filings and payments under this framework in 2024.

Who is subject to the 9% corporate tax?

• Mainland businesses: All entities registered in the UAE, including those engaged in commercial, industrial, and professional activities, are subject to corporate tax.
• Free zone companies: Qualifying free zone entities may continue to benefit from a 0% tax rate under certain conditions (which we will discuss next), but non-qualifying income is taxed at 9%.
• Natural persons (individuals running businesses): Any individual earning over AED 1 million annually from business activities must register for corporate tax by March 31, 2025, or face a penalty of AED 10,000.
• Foreign entities: Businesses with a permanent establishment (PE) in the UAE are subject to taxation on UAE-sourced income.
• Freelancers, consultants, and sole proprietors earning above the AED 375,000 are taxed.

Who is Exempt from Corporate Tax?

While most UAE-based businesses are subject to the 9% corporate tax, several entities qualify for exemptions, allowing them to operate tax-free under specific conditions.

• Free zone companies:
  
  • Qualifying Free Zone Persons (QFZP) can benefit from a 0% corporate tax rate if they meet the requirements set by the Federal Tax Authority (FTA).
  • They must generate qualifying income from transactions within the free zone or with businesses outside the UAE.
  • Income from transactions with UAE mainland companies may be subject to corporate tax, depending on the type of business activity.
• Government and public entities:
  
  • Entities wholly owned by the UAE government and engaged in public benefit projects are exempt.
• Extractive businesses:
  
  • Companies involved in the extraction of natural resources (oil, gas, and minerals) remain taxed under emirate-level tax regimes instead of the federal corporate tax framework.
• Charities and public benefit organisations:
  
  • Non-profit entities that meet FTA recognition criteria may be exempt, provided their activities align with public benefit purposes.
• Small businesses below the threshold:
  
  • Companies and individuals with annual taxable profits below AED 375,000 are exempt from corporate tax.

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Domestic Minimum Top-Up Tax (DMTT) and Global Tax Alignment

As part of the UAE’s commitment to aligning with global tax standards, the Domestic Minimum Top-Up Tax (DMTT) takes effect for financial years starting on or after January 1, 2025. This move is part of the OECD's Pillar Two initiative, which aims to ensure that large multinational enterprises (MNEs) pay a minimum effective tax rate of 15% on their global profits, preventing tax base erosion and profit shifting.

What is the Domestic Minimum Top-Up Tax?

The DMTT applies to MNEs with consolidated global revenues of at least €750 million (approximately AED 2.99 billion) in at least two out of the four financial years preceding 2025. If an MNE’s effective tax rate (ETR) in the UAE falls below 15%, the top-up tax will bridge the gap to meet the global minimum tax standard.

This ensures that corporate tax benefits, such as 0% taxation for qualifying Free Zone businesses, do not result in companies avoiding tax obligations under global tax rules.

Key Considerations for Multinational Enterprises

For MNEs operating in the UAE, the DMTT and recent tax increase in Dubai introduces new tax compliance obligations, including:

• Assessment of global tax position: Businesses must evaluate their effective tax rate across different jurisdictions to determine whether a top-up tax applies.
• Alignment with OECD GloBE Model rules: The DMTT follows OECD guidelines but does not currently include the Income Inclusion Rule (IIR) or the Undertaxed Profits Rule (UTPR).
• Impact on free zone companies: Businesses benefiting from 0% Free Zone tax rates may need to reassess their corporate structure if the total tax paid by the MNE group is below 15%.
• Financial reporting and compliance: IFRS is the primary accounting standard for tax calculations, and MNEs must prepare financial reports that comply with OECD’s GloBE Model Rules.
• Transfer pricing & documentation: Multinational enterprises (MNEs) and UAE entities engaging in related-party transactions must maintain transfer pricing documentation to align with OECD guidelines. Required documents include:
  
  • Master file: Overview of the global group structure.
  • Local file: Details of intercompany transactions within the UAE.
  • Country-by-country reporting (CbCR): Required for MNEs exceeding the €750 million threshold.

By implementing DMTT, the UAE reinforces its commitment to international tax cooperation while maintaining its attractiveness as a leading business hub. 

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New Tax Incentives for Businesses in the UAE

To encourage economic growth, innovation, and high-value employment, the UAE is introducing new corporate tax incentives that businesses can leverage.

• R&D Tax Incentives (Effective 2026)
  
  • Companies investing in research and development (R&D) may be eligible for an expenditure-based tax credit of 30-50%.
  • The incentive is aimed at boosting innovation and economic development within the UAE.
• Refundable Tax Credit for High-Value Employment (Effective 2025)
  
  • Businesses hiring C-suite executives and professionals in key industries may receive a refundable tax credit.
  • This is designed to attract top talent and enhance the UAE’s competitiveness in global markets.

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Tax Compliance and Strategies for UAE Businesses

With the 2025 UAE corporate tax regulations introducing new compliance requirements and incentives, businesses must adopt proactive tax strategies to stay compliant, avoid penalties, and optimise their tax positions. Here are key strategies UAE businesses should implement:

• Optimise tax structures
  
  • Companies in free zones should reassess whether they meet the Qualifying Free Zone Person (QFZP) criteria to continue benefiting from the 0% corporate tax rate.
  • Businesses operating across multiple jurisdictions should analyse their tax residency status to prevent double taxation risks.
• Leverage tax incentives
  
  • R&D tax credits: Businesses investing in innovation and technology should maximise R&D tax incentives (effective 2026), allowing them to claim up to 50% tax credits.
  • High-value employment tax credits: Companies employing C-suite executives and specialists should take advantage of refunds on eligible salary costs.
• Ensure accurate financial record-keeping
  
  • Maintaining detailed financial records is essential for corporate tax filings, transfer pricing compliance, and VAT reporting.
  • Businesses should automate bookkeeping processes and use ERP-integrated accounting systems to prevent errors and ensure seamless tax compliance.
• Implement transfer pricing best practices
  
  • Related-party transactions must be priced at arm’s length to comply with UAE’s transfer pricing regulations.
  • Companies must conduct benchmarking studies and maintain documentation to justify their intercompany pricing policies.
• VAT and e-invoicing compliance
  
  • Businesses must integrate e-invoicing systems to comply with the UAE’s E-Invoicing framework, which will begin in July 2026 for B2B and B2G transactions.
  • Real-time reporting of e-invoices via government-approved platforms will be required for tax transparency.
• Stay updated with FTA regulations
  
  • The UAE tax framework is evolving, and businesses must stay informed on legislative updates, policy changes, and reporting requirements.
  • Regular tax assessments and compliance audits can help businesses identify gaps and address potential risks before facing regulatory scrutiny.

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Simplify Tax Compliance and Financial Management with Alaan

Steering through the UAE’s evolving corporate tax regulations can be complex, but with the right tools, you can streamline compliance and optimise your financial processes. At Alaan, we provide businesses with an intelligent financial management platform that automates tax reporting, expense tracking, and invoicing—ensuring that you stay compliant with the latest UAE tax laws. 

Here’s how Alaan helps you stay compliant:

• Automated tax tracking and reporting: Alaan integrates with ERP and accounting systems to ensure your corporate tax filings are accurate and timely. You can track tax-deductible expenses, VAT liabilities, and invoice submissions without manual intervention.
• Seamless e-invoicing integration: With the UAE’s mandatory e-invoicing system launching in 2026, Alaan helps you prepare in advance by digitising invoice management and ensuring real-time reporting compliance.
• Effortless VAT reconciliation: You no longer have to worry about VAT mismatches—Alaan automatically categorises transactions, verifies VAT compliance, and prepares audit-ready reports to minimise errors.
• Expense management with real-time tracking: Gain complete visibility into your company’s finances with real-time spending insights, AI-driven approval workflows, and automated receipt matching—ensuring that every dirham spent is accounted for.
• Multi-currency and cross-border transaction tracking: For businesses operating internationally, Alaan ensures compliance with transfer pricing regulations, enabling smooth financial operations across multiple jurisdictions.

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Conclusion

With the new UAE tax framework taking full effect in 2025, businesses must act now to ensure compliance and optimise their tax positions. Here’s what companies should do next:

• Register for corporate tax with the FTA before their deadline to avoid penalties.
• Review their financial structures to determine eligibility for tax exemptions and incentives.
• Adopt tax automation solutions to streamline compliance with VAT, e-invoicing, and corporate tax filings.

At Alaan, we help you stay ahead of these changes by automating tax reporting, tracking VAT compliance, and seamlessly integrating with your accounting system. With AI-driven financial insights, real-time expense tracking, and audit-ready reporting, Alaan ensures your business remains compliant while optimising cash flow and operational efficiency.

By taking proactive tax planning measures, businesses can ensure compliance, minimise tax exposure, and capitalise on government incentives while aligning with the UAE's economic vision for sustainable growth. Book a free demo today and discover how Alaan can simplify your business's tax compliance and financial management.