Corporate Tax 2025: What UAE Businesses Must Know
A practical overview of the new corporate tax framework in the UAE, highlighting key changes and what they mean for companies.
Starting from 1 June 2023, the United Arab Emirates introduced its first federal corporate tax, marking a major shift in the country’s business environment. In 2025, further updates and clarifications are set to take effect, and businesses need to be prepared to adapt.
The standard corporate tax rate remains 9% on taxable profits exceeding AED 375,000, while profits below this threshold continue to be exempt, supporting small businesses and startups. What is new for 2025 is a stronger focus on transfer pricing compliance and international reporting standards, in line with global tax practices. Companies engaged in cross-border transactions are expected to maintain detailed documentation to avoid penalties.
Another important update is the increased scrutiny on free zone entities. While many free zone businesses still enjoy preferential rates, the Ministry of Finance has clarified that benefits only apply if companies meet the “substance” requirements and conduct qualifying activities. This means that simply registering in a free zone without real operations will no longer shield businesses from tax obligations.
For SMEs, the government has introduced simplified compliance processes, including digital filing platforms and reduced reporting requirements, to ease the transition.
Overall, corporate tax in the UAE is becoming more aligned with global standards. Businesses should review their structures, ensure proper documentation, and seek legal or tax advice to remain compliant and competitive in this evolving landscape.
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