If you’re reading this article, it means you’re planning to set up a new business in the UAE or already running one. The UAE has long been a premier business hub because of its business-friendly laws and regulations. Historically, the Emirates has been regarded for its 0% corporate tax rate. However, things have changed since the fiscal year starting 1 June 2023. The country introduced its corporate tax framework in December 2022, effective for financial years on or after 1 June 2023. So, every business – new or existing – must pay corporate tax in the UAE. Good news: To maintain its reputation as a business-friendly country, the tax rates are lower (0-9%) than other countries worldwide. This guide is primarily intended for new businesses in the UAE, giving them a clear overview of corporate tax and other applicable taxes. Understanding their specific tax obligations is critical for businesses to maintain compliance.
UAE Corporate Tax Regime 2025
Corporate tax is a direct tax levied by the Federal Tax Authority (FTA) on the net income of businesses and corporations operating in the UAE. Corporate tax is also known as business profits tax or corporate income tax (CIT). The tax rates are lower than global standards, reflecting the country’s efforts to support small businesses and attract foreign investors.
Taxable Income UAE CT rate (%) (on the portion of the taxable income)
- Below AED375,000: 0%
- Exceeding AED375,000: 9%
Corporate Tax Registration: Who Needs to Register
Entities that need to pay corporate tax in the UAE are categorized as follows:
Resident taxpayers:
- Entities incorporated in the UAE
- Foreign entities managed and controlled in the UAE
- Individuals conducting business in the UAE
All resident entities operating offshore, in free zones, or on the mainland are required to pay corporate tax on their global income.
Non-resident taxpayers:
- Permanently established companies in the UAE
- Those earning UAE-sourced income with no permanent establishment or having a nexus in the UAE.
Businesses Eligible for Corporate Income Tax Exemption in the UAE
UAE Federal corporate tax exemption automatically applies to government entities and government-controlled entities. Other exempt persons include the following:
- Extractive businesses
- Non-extractive natural resource businesses
- Qualifying public benefit entities
- Qualifying investment funds
- Pension or social security funds
- Wholly owned and controlled UAE subsidiaries of certain exempt entities
Small Businesses
Small businesses are also exempt from the UAE corporate income tax, given that they meet the following criteria:
- A resident entity in the UAE.
- Revenue equal to or less than AED 3,000,000 in the current and previous tax periods.
- A financial institution or a holding company.
Qualifying Free Zone Persons
Qualifying Free Zone Persons (QFZP) already pay a 0% corporate tax rate. A Qualifying Free Zone Person is a Free Zone Person who:
- Maintains sufficient substance in the UAE
- Generates Cabinet-specified income
- Fulfills the requirements under the Arm’s Length Principle
- Complies with transfer pricing rules
- Has audited financial statements as per the International Financial Reporting Standards (IFRS)
- Maintains non-qualifying income below the de-minimis threshold
Deadline for Corporate Tax Return Filing
Every new business must file its first corporate tax return within nine months after its relevant fiscal year ends. Any federal corporate tax payable must be settled within this timeframe.
Here are some important dates:
- Registration deadline: 31 March 2025
- Tax return filing: 30 September 2025
Failure to register for corporate tax before the deadline results in a penalty of AED 10,000. Additional fines are incurred for late tax filing, incorrect information, or failure to keep records.
Value Added Tax (VAT) in the UAE 2025
Value Added Tax (VAT) is an indirect tax applied to most goods and services. Unlike federal corporate income tax, which targets earnings, UAE VAT is a multi-stage tax imposed at each stage of the supply chain. End consumers bear the costs.
The UAE government introduced VAT in January 2018, and the current standard VAT rate is 5%. However, a 0% VAT rate is levied on certain goods and services, such as exports outside the Gulf Cooperation Council (GCC), while others are exempt from VAT.
Excise Tax for Businesses in the UAE
Excise tax in the UAE is another indirect tax imposed on goods that are harmful to human health and the environment. The excise tax rate in the UAE depends on the degree of health and environmental risks associated with each product category.
Excise Goods and Tax Rate
- Tobacco and tobacco products: 100%
- Carbonated drinks (excluding plain, unflavored sparkling water): 50%
- Energy drinks: 100%
- E-cigarettes and related products: 100%
- Sweetened beverages: 50%
Domestic Minimum Top-Up Tax (DMTT) for Multinationals
On 1 January 2025, the UAE Ministry of Finance (MoF) introduced DMTT on multinational enterprises (MNEs) under the Organisation for Economic Co-operation and Development’s (OECD) Two-Pillar Solution. MNEs with consolidated global revenues of €750 million or more in at least two of the four preceding fiscal years must pay a minimum tax rate of 15% on profits globally.
Customs Duties in the UAE
Businesses operating in the UAE must pay a 5% customs duty on most goods imported from foreign nations. Goods imported from the Gulf Cooperation Council (GCC) countries are treated as local goods, provided that 40% of the raw materials used for these commodities originated in the GCC.
Stay Compliant, Keep Growing
The UAE’s tax landscape for businesses is relatively new and remains on the lower end globally. The challenge, particularly for new businesses, is that all applicable taxes in the UAE are strictly enforced. Non-compliance results in hefty fines, lawsuits, and even operational shutdowns. Therefore, staying compliant is essential to avoid penalties and thrive in the UAE’s flourishing business environment.
Setting up a company in the UAE requires careful tax planning to ensure smooth operations and compliance. Company Setup Connect Group can help you navigate the UAE’s corporate tax regime. Our team can handle everything, from applying for the UAE tax registration number and obtaining a Tax Residency Certificate to submitting tax returns accurately and on time for your new business.
