Corporate Tax in UAE (2025): Everything You Need to Know

Introduction to Corporate Tax in UAE

Corporate tax has become a pivotal topic for businesses operating in the UAE. As the country shifts its economic focus, the introduction and refinement of corporate tax policies are reshaping the business landscape. For 2025 and 2026, understanding these changes is crucial for enterprises seeking to thrive in a dynamic environment.

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Key Changes in UAE Corporate Tax for 2025 and 2026

2025 marks a year of refinement for corporate tax regulations in the UAE. Key updates include:

• Domestic Minimum Top-up Tax DMTT: A 15 percent minimum tax for large multinational groups with revenues over 750 million Euros.
• Small Business Relief: Extension of relief for businesses with revenue below 3 million AED until December 2026.
• Enhanced Compliance: Stricter documentation and electronic invoicing requirements starting mid 2026.

These changes aim to align with global tax standards while fostering a transparent and competitive business ecosystem.

Understanding Taxable Entities

The UAE corporate tax applies to a range of entities, including:

• Corporations: Both domestic and foreign entities operating in the UAE.
• Free Zone Entities: Specific conditions apply to ensure compliance without losing competitive advantages like the 0 percent rate on qualifying income.
• Natural Persons: Individuals conducting business activities with turnover exceeding 1 million AED per year.

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Exemptions and Reliefs

Certain sectors and income streams are exempt from corporate tax, including:

• Natural Resource Extraction: Subject to Emirate level taxation.
• Qualifying Dividends: Earned from qualifying shareholdings.
• Government Entities: Automatic exemptions for government owned organizations.

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Compliance and Reporting Requirements

Compliance involves several key steps in 2026:

1. Registration: All taxable persons must register and obtain a Tax Registration Number TRN.
2. Filing Returns: Tax returns must be filed within 9 months from the end of the financial year. For many, the first deadline is September 2026.
3. Record Keeping: Maintain financial records for at least 7 years.
4. DMTT Compliance: Large groups must perform top up tax calculations in their reporting currency.

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Impact on Businesses

Corporate tax impacts businesses differently based on size and structure:

• Cash Flow Management: Planning for 9 percent tax on profits above 375,000 AED is essential.
• Audit Requirements: Many free zones now require audited financial statements to maintain tax benefits.
• Transparency: Enhanced reporting builds global credibility for UAE firms.

Strategies for Compliance

Key strategies include:

• Engage Tax Experts: Navigate complex transfer pricing and DMTT rules with professionals.
• Software Integration: Use FTA approved accounting tools for seamless reporting.
• Timely Registration: Avoid the 10,000 AED penalty for late registration.

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Conclusion

The introduction of corporate tax in the UAE represents a significant shift, but with the right strategies, businesses can ensure compliance and maintain their competitive edge. Staying informed about 2026 deadlines is the key to navigating these changes successfully.

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FAQs

1. What is the corporate tax rate in UAE for 2025 and 2026?

The rate is 0 percent for income up to 375,000 AED and 9 percent for income above that threshold.

2. What is the Domestic Minimum Top-up Tax DMTT?

It is a 15 percent minimum tax for large multinationals with revenues over 750 million Euros, effective from January 2025.

3. When is the first corporate tax return due?

For businesses with a financial year ending December 31, 2024, the return must be filed by September 30, 2026.

4. Is there relief for small businesses?

Yes, Small Business Relief allows companies with revenue below 3 million AED to be treated as having no taxable income until December 2026.

5. Are there penalties for late registration?

Yes, the FTA imposes a penalty of 10,000 AED for failure to submit a registration application within the timelines.