After years of maintaining a 0% corporate tax rate, the United Arab Emirates (UAE) introduced a federal corporate income tax in 2023. This marks a significant step in the country’s fiscal evolution while still preserving its competitive investment climate. In this article, Palm Estate outlines what the new tax law entails, what has changed in 2025, and how to navigate this environment as a business owner or investor.
Introduction of 9% Corporate Tax
As of June 1, 2023 (or from the beginning of the next applicable financial year), all UAE-registered businesses are subject to a 9% corporate tax on profits exceeding AED 375,000 (approximately €95,000). Profits below this threshold remain tax-free, providing relief to smaller companies and start-ups.
With this move, the UAE remains one of the most tax-efficient jurisdictions globally. The 9% rate is still significantly lower than in countries such as the Netherlands or Belgium (around 25%) and aligns the UAE with international standards, including the OECD’s global minimum tax framework, without overburdening SMEs.
Free Zones Remain Attractive
Businesses operating within UAE free zones such as DMCC, Dubai Internet City, or Jebel Ali Free Zone can continue to benefit from 0% corporate tax on qualifying income, provided they meet the necessary conditions—such as maintaining adequate substance (office, staff) and refraining from mainland business activities.
However, non-qualifying income—such as local mainland revenue—will be taxed at 9%. Compliance with free zone regulations is essential to preserve the tax-exempt status.
Key Changes Effective in 2025
Several important updates apply from 2025 onwards:
- Mandatory registration for individual entrepreneurs: Freelancers and sole proprietors generating annual revenues over AED 1 million (~€250,000) must register for corporate tax, even if their net income remains below the taxable threshold.
- Filing obligations: All registered entities must submit an annual corporate tax return within nine months after the end of their financial year.
- Small Business Relief: Businesses with annual revenues below AED 3 million (~€750,000) may qualify for Small Business Relief until the end of 2026. This allows them to be treated as having zero taxable income, provided they apply annually via the EmaraTax portal.
- Transfer pricing and related party disclosures: Companies with related-party transactions exceeding AED 40 million per year, or those providing over AED 500,000 in benefits to connected persons, may be required to maintain and submit detailed documentation.
Corporate Tax Summary (2025)
| Category | Applicable Rate |
|---|---|
| Profits up to AED 375,000 | 0% |
| Profits above AED 375,000 | 9% |
| Free Zone Entities (qualifying income) | 0% |
| Free Zone Entities (non-qualifying income) | 9% |
| Multinationals subject to OECD DMTT rules | Minimum 15% effective rate |
Strategic Considerations for Investors and Business Owners
- Register and comply on time: Late registration may result in a fine of AED 10,000 (~€2,500).
- Assess your taxable status: Determine whether your business will remain below the threshold or whether tax planning is required.
- Explore free zone options: Ideal for companies engaged in international trade or holding structures.
- Seek local advisory support: While the UAE remains fiscally attractive, professional guidance is key to maintaining compliance and optimising your corporate structure.
Palm Estate: Your Partner for Strategic Growth in Dubai
Palm Estate collaborates with a trusted network of local tax consultants and corporate advisors to help you stay ahead of regulatory developments. Whether you’re launching a new venture, relocating your holding structure, or expanding your operations in the UAE, our team ensures you take full advantage of Dubai’s favourable business environment.
Position your business for success—let us connect you with the right experts.