The United Arab Emirates (UAE), traditionally recognized for its appealing financial environment, is strategically repositioning itself. This shift is driven by a desire to lessen its reliance on oil and gas revenues and implement measures designed to curb profits shifting by multinational entities. To this end, the UAE government initiated significant legislative changes in 2023. The most pivotal was the adoption of a corporate tax in UAE, which underscores the commitment to economic diversification and alignment with global financial standards.
A Brief Overview of Corporate Tax in UAE
The adoption of the corporate tax in UAE requires firms to commence filing tax returns for fiscal periods beginning on or after June 1, 2023. A standard tariff of 9% applies to earnings over 375,000 AED. Adopting the tariff increases budget transparency and compliance with financial norms. The exact structure includes a 0% tariff on income up to 375,000 AED, a 9% tariff on income more than 375,000 AED, and a 0% tariff for firms in free zones. Particular terms apply to government establishments and the extractive field. Below, we'll discuss who must register to pay corporate tax in UAE.
- Mainland firms. Any mainland firm engaged in trade or industrial operations must be aware of its tariff.
- Free zone participants with non-qualifying earnings. Such organizations may lose their tax-exempt status if they get money from the mainland, do not have limited distribution status, or fail to meet other criteria.
- Foreign firms that operate in the Emirates. If such firms have permanent representatives in the Emirates or derive revenues from local sources, they must comply with actual norms.
- Freelancers and self-employed specialists. Individuals conducting legitimate businesses must register if their yearly earnings exceed 1,000,000 AED. Violations of the norm result in a considerable fine.
The Emirates is a tax-friendly region. However, after the adoption of the UAE corporate tax reform 2025, entrepreneurs should be aware of their classification and take appropriate action.
A Few Words About the DMTT
A new provision has been added to the UAE tax law about the Domestic Minimum Top-Up Tax (DMTT). It stipulates that popular multinational enterprises (MNEs) that make money in the Emirates pay a tax tariff of no less than 15%. If MNEs previously paid below this level, the DMTT will offset those losses.
This provision took effect on January 1, 2025. Financial professionals must apply this algorithm if the corporation's total earnings were €750 million (approximately AED 2.99 billion) or more for two of the last four accounting years.
Although an organization may work in a zero-rated economic zone, it can still utilize the DMTT algorithm if the group's total effective rate is less than 15%.
This update brings the country in line with the OECD's worldwide initiative. It ensures fairer taxation and prevents income dilution. Without a domestic tariff, foreign jurisdictions could impose their own mandatory payments, potentially harming the country's attractiveness as a business location.
Organizations must file a DMTT return within 15 months of the end of the accounting year. The current year is transitional, so the Federal Tax Authority (FTA) decided to extend the interval to 18 months.
Corporate Tax in UAE for Free Zones
Free zones are a primary component of the UAE's commercial environment. They offer tax deductions to encourage investment. Currently, there are over 50 such zones in the Emirates, with about 40 of them located in Dubai. Under new norms, firms in such economic zones can still qualify for a 0% corporate tax in UAE if they meet several criteria.
So, Qualified Free Zone Persons (QFZPs) are entitled to a 0% tariff on operations with other economic zone participants. Profits from non-qualified procedures or excluded operations, including transactions with the mainland or collaborations with non-tax-registered participants, are subject to the standard 9% tariff.
If you want to operate in a special economic zone, you should register with an authorized institution and maintain a significant presence in the Emirates. It will ensure the company's position as a legal entity, enabling it to comply with the free zone's norms and benefit from its privileges. Other factors to obtain the status include the provision of examined financial reports regardless of turnover and compliance with transfer pricing norms.
In September 2025, the UAE Department of Finance published a series of decisions that changed the corporate tax in UAE for firms operating in special economic zones. Primary UAE tax rule changes include an expanded definition of qualifying commodity transactions. Until 2025, the list included only raw materials; now it encompasses industrial chemicals, carbon credits, and traditional products that meet standards, including metals, energy, and agricultural goods.
The latest update allows such goods to qualify, even if they are in unprocessed form, provided there is a transparent price quotation from a reputable institution, such as a commodity exchange or a price reporting organization listed in official documents.
Another update affects product distribution: companies in certain economic zones can supply products to public organizations, provided the total value remains below the specified minimum limit. This threshold defines a value under which customs duties are not applied, as collecting them would cost more than the duties themselves. It enables businesses to benefit from the UAE new tax framework while carrying out socially significant operations.
Tax Residency in 2025
A significant development for individuals in the new tax regime is the codified taxation algorithm. According to the norms, people may become tax residents if they meet one or more criteria.
- They are physically present in the Emirates for 183 days or more during a calendar year.
- The UAE constitutes the individual's "permanent home," meaning they own or personally use a residential property there.
- The person holds a residence visa permitting residency for at least 6 months per year.
These norms apply to citizens of the Emirates and other countries. An individual may also attain tax residency status if they meet a secondary test: they are not a resident of another country, and they spend 90 days or more in the Emirates. It allows individuals who do not meet the primary stay norms but who lack residency elsewhere to still be classified as Emirates residents.
The FTA issues a Tax Residency Certificate (TRC), a significant financial planning document. It allows access to crucial advantages.
- 0% or decreased tariffs on dividends, capital gains, and royalties.
- Getting tax residency status to comply with banking norms.
- Limiting double taxation in regions with tax treaties.
The Emirates imposes strict checks before issuing a TRC. People must prove they have been in the country for 183 or 90 days and have economic ties. Proof can be provided by immigration information, local bank statements, and the presence of family members. Companies require one year of licensed activity or more, examined financial documents, a current lease agreement, and active account money movement.
Final Words
The tax reform is revolutionizing the jurisdiction's business conditions. With the adoption of a 9% corporate tax in UAE, firms must adjust their development strategies. Startups evaluating special economic zone activity, small firms, and international corporations must adopt structured, compliant tax management.
At ExecDubai, we are ready to answer all your questions about running your firm in the Emirates. Our managers will find the optimal economic zone and explain all the intricacies of tax registration to prevent penalties. We understand all ambiguous aspects of local legislation to allow your firm to grow.