Corporate Taxation in the UAE in 2025: What Has Changed?

In 2025, corporate taxation in the UAE continues to evolve. Despite its reputation as a low-tax jurisdiction, the UAE government is gradually implementing new rules to align with international standards and improve financial transparency. This article outlines the current state of corporate taxation in the UAE in 2025, key changes, and what business owners need to do to stay compliant.

Key Provisions of UAE Corporate Tax

Since June 1, 2023, the UAE has introduced a Corporate Tax (CT) at a rate of 9% on taxable profits exceeding AED 375,000. Companies earning below this threshold are exempt from the tax.

Core details:

• Rate: 9% (on profit > AED 375,000)
• Base currency: UAE dirham
• Tax base: Net profit after allowable deductions
• Filing: Annually, within 9 months of the end of the tax period

For updated guidance, visit the UAE Ministry of Finance and Federal Tax Authority (FTA) websites.

Who Is Subject to Corporate Tax?

Corporate Tax applies to all legal entities registered in the UAE, including:

• Mainland companies
• Free Zone companies (if they operate outside the zone or with UAE residents)
• Branches of foreign companies

Exempt entities include:

• Individuals not conducting business
• Government entities
• Non-profit organizations (under certain conditions)
• Oil and gas companies (regulated under separate regimes)

The complete list of exemptions is provided in Federal Decree-Law No. 47 of 2022 on Taxation of Corporations and Businesses (PDF).

Taxation of Free Zone Companies

Companies registered in Free Zones may continue to benefit from the 0% preferential rate if they meet specific conditions:

• Conduct qualified activities (e.g., logistics, exports, financial services)
• Avoid transactions with mainland clients
• Comply with residency requirements

Important: If a Free Zone company generates income from mainland clients, the 9% tax applies to that portion of income.

For full criteria, refer to Ministerial Decision No. 114 of 2023 on Taxable Income Rules (PDF).

What Expenses Can Be Deducted?

To calculate the taxable base, the following business expenses may be deducted:

• Office rent
• Employee salaries
• Marketing and advertising costs
• Business travel expenses
• Asset depreciation
• License and government fees

The detailed expense rules are available in Ministerial Decision No. 114 of 2023 (PDF).

Key Changes Introduced in 2025

As of 2025, several clarifications and updates have been enacted:

• A taxpayer e-portal has been launched on the FTA platform
• Qualification criteria for Free Zone businesses have been updated
• Rules for calculating taxable income for hybrid activities (partly in-zone, partly mainland) have been clarified
• Penalties for late filings and tax evasion have been specified

Recommendations for Businesses

1. Evaluate your status: Determine whether your company is in a Free Zone or on the Mainland and whether you deal with UAE residents.
2. Check your eligibility for Free Zone benefits: Especially if you plan to retain the 0% tax rate.
3. Ensure your accounting is compliant: Your bookkeeping must align with the new tax base rules for 2025.
4. Register with the FTA: Through the portal.

Corporate taxation in the UAE in 2025 continues to evolve toward greater transparency and global compliance. Despite the introduction of corporate tax, the UAE remains one of the most attractive jurisdictions for doing business—thanks to its low tax rate, exemptions, and economic stability. Staying informed and compliant is essential to avoiding fines and maintaining business continuity.