Corporate Tax in Dubai: What Businesses Must Know in 2025

In the UAE, it is mandatory for businesses to register for corporate tax with the Federal Tax Authority (FTA) if they are a mainland business, a Free Zone business, or a local branch of an international business and taxable income exceeds AED 375,000 on an annual basis. Government recognises certain entities and extractive businesses as exempt.

Free Zone companies are to register and file their returns. They may be able to apply a 0% corporate tax rate when qualifying income is generated, subject to certain substance and activity requirements (e.g. there must be operational activity carried out in the Free Zone and the accounts must be separate).

Taxable income is determined based on net profits in accordance with the audited financial statements, adjusted for allowable deductions, exemptions and unrealized gains or losses. Companies must maintain adequate accounting records to comply with IFRS.

Transfer Pricing (TP) regulations in the UAE require companies to ensure that their transactions with related parties take place at arm's length. This is to avoid profit shifting and erosion of the tax base. Transfer pricing documentation is required for larger entities or those that engage in cross-border transactions.

Penalties can range from AED 10,000 if registration is late, penalties if non-compliance of a penalty, if inaccurate reporting, and failure to maintain records. A business could also be subject to suspension of their business license and legal action by the FTA in case of continued violations.

Companies only have to file one corporate tax return in the UAE per year, however, deadlines around this one return includes filing within 9 months from the end of the relevant financial year. Due date adherence is very important or penalties can apply.

Yes. Freelancers and sole proprietors must register for corporate tax only if their net income exceeds AED 375,000 annually. However, they do not pay tax on income (i.e. salary or similar) unless the income is received as a result of carrying on a licensed business activity.

Yes, businesses are allowed to take deductions for expenses that are wholly and exclusively incurred for business purposes. Capital expenditures may be deductible up to a certain limit, in addition to interest and research and development costs. There are limitations and restrictions on other expenses, like entertainment and fines.

By hiring a certified tax consultant, you can ensure that your business is compliant with the UAE tax laws. A tax professional can assist with registration, returns, transfer pricing and FTA audits to limit your risk and penalties while optimizing your position for tax.