Understanding the UAE Tax System for Newly Established Companies [2025 Guide]

If you’re reading this article, it means you’re planning to set up a new business in the UAE or already running one. The UAE has long been a premier business hub because of its business-friendly laws and regulations. Historically, the Emirates has been regarded for its 0% corporate tax rate. However, things have changed since the fiscal year starting 1 June 2023.   The country introduced its corporate tax framework in December 2022, effective for financial years on or after 1 June 2023. So, every business – new or existing – must pay corporate tax in the UAE.   Good news: To maintain its reputation as a business-friendly country, the tax rates are lower (0-9%) than other countries worldwide.   This guide is primarily intended for new businesses in the UAE, giving them a clear overview of corporate tax and other applicable taxes. Understanding their specific tax obligations is critical for businesses to maintain compliance.

UAE Corporate Tax Regime 2025

Corporate tax is a direct tax levied by the Federal Tax Authority (FTA) on the net income of businesses and corporations operating in the UAE. Corporate tax is also termed as business profits tax or corporate income tax (CIT). The tax rates are lower than global standards, reflecting the country’s efforts to support small businesses and attract foreign investors.  

Taxable Income	UAE CT rate (%) (on the portion of the taxable income)
Below AED375,000	0%
Exceeding AED375,000	9%

 

Corporate Tax Registration: Who Needs to Register

Entities that need to pay corporate tax in the UAE are categorised as below:

  Resident taxpayers:   

• Entities incorporated in the UAE
• Foreign entities managed and controlled in the UAE
• Individuals conducting business in the UAE

  All resident persons operating offshore, in free zones, or on the mainland have to pay corporate tax on their global income.   Non-resident taxpayers: 

• Permanently established companies in the UAE 

• Those earning UAE-sourced income with no permanent establishment or having a nexus in the UAE.

Businesses Eligible for Corporate Income Tax Exemption in the UAE

UAE Federal corporate tax exemption automatically applies to government entities and government-controlled entities. Other exempt persons include the following:  

• Extractive businesses 
• Non-extractive natural resource businesses
• Qualifying public benefit entities
• Qualifying investment funds
• Pension or social security funds
• Wholly owned and controlled UAE subsidiaries of certain exempt entities

Small Businesses

Small businesses are also exempt from the UAE corporate income tax, given that they meet the following criteria:  

• A resident person in the UAE.
• Revenue equal to or less than AED 3,000,000 in the current and previous tax periods.
• A financial institution or a holding company

  Note: Exemption is applicable for tax periods ending before or on 31 December 2026 unless the Federal Tax Authority extends or amends the relief.

Qualifying Free Zone Persons

Qualifying Free Zone Persons (QFZP) already pay a 0% corporate tax rate. A Qualifying Free Zone Person is a Free Zone Person who:  

• Maintains sufficient substance in the UAE
• Generates Cabinet-specified income
• Fulfills the requirements under the Arm’s Length Principle
• Complies with transfer pricing rules
• Have audited financial statements as per the International Financial Reporting Standards (IFRS)
• Non-qualifying income below the de-minimis threshold

Deadline for Corporate Tax Return Filing 

Every new business must file its first corporate tax return within nine months after its relevant fiscal year ends. Any federal corporate tax payable must be settled within this timeframe.    Here are some important dates:   Registration deadline: 31 March 2025   Tax return filing: 30 September 2025   Failing to register for corporate tax before the deadline incurs a penalty of AED 10,000. Additional fines are incurred for late tax filing, incorrect information, or failure to keep records.

Businesses Eligible for Corporate Income Tax Exemption in the UAE

UAE Federal corporate tax exemption automatically applies to government entities and government-controlled entities. Other exempt persons include the following:  

• Extractive businesses 
• Non-extractive natural resource businesses
• Qualifying public benefit entities
• Qualifying investment funds
• Pension or social security funds
• Wholly owned and controlled UAE subsidiaries of certain exempt entities

Small Businesses

Small businesses are also exempt from the UAE corporate income tax, given that they meet the following criteria:  

• A resident person in the UAE.
• Revenue equal to or less than AED 3,000,000 in the current and previous tax periods.
• A financial institution or a holding company

  Note: Exemption is applicable for tax periods ending before or on 31 December 2026 unless the Federal Tax Authority extends or amends the relief.

Qualifying Free Zone Persons

Qualifying Free Zone Persons (QFZP) already pay a 0% corporate tax rate. A Qualifying Free Zone Person is a Free Zone Person who:  

• Maintains sufficient substance in the UAE
• Generates Cabinet-specified income
• Fulfills the requirements under the Arm’s Length Principle
• Complies with transfer pricing rules
• Have audited financial statements as per the International Financial Reporting Standards (IFRS)
• Non-qualifying income below the de-minimis threshold

Deadline for Corporate Tax Return Filing 

Every new business must file its first corporate tax return within nine months after its relevant fiscal year ends. Any federal corporate tax payable must be settled within this timeframe.    Here are some important dates:   Registration deadline: 31 March 2025   Tax return filing: 30 September 2025   Failing to register for corporate tax before the deadline incurs a penalty of AED 10,000. Additional fines are incurred for late tax filing, incorrect information, or failure to keep records.

Excise Tax for Businesses in the UAE

Excise tax in the UAE is another indirect tax imposed on goods that are harmful to human health and the environment. The excise tax rate in the UAE depends on the degrees of health and environmental risks associated with each product category. The following table shows excise goods with associated tax rates.  

Excise Goods	Tax Rate
Tobacco and tobacco products	100%
Carbonated drinks (Excluding plain, unflavored sparkling water)	50%
Energy drinks	100%
E-cigarettes and related products	100%
Sweetened beverages	50%

 

Who Must Register for Excise Tax in the UAE

All businesses producing or importing excise goods from a designated zone must file and pay excise tax. They typically include:  

• Importers: Companies importing excise goods into the UAE.
• Manufacturers: Businesses producing excise goods for domestic consumption.
• Stockpilers: Companies that stockpile excise goods, potentially for resale, without prior tax clearance.
• Warehouse keepers: Any entity responsible for overseeing excise zones or warehouses.

  Businesses registered for excise tax must submit their returns by the 15th day of each month, and this deadline is strictly enforced. Non-compliance with deadlines and payment obligations can result in penalties, including fines, interest charges, and strict audits.   If the Taxable Person fails to submit price lists to the UAE Federal Tax Authority for the excise goods manufactured, imported, or stockpiled therein. The fine is AED 5,000 the first time and AED 20,000 in case of subsequent acts. In addition, failure to register as an excise taxpayer on time leads to a fine of AED 20,000.

Domestic Minimum Top-Up Tax (DMTT) for Multinationals

On 1 January 2025, the UAE Ministry of Finance (MoF) introduced DMTT on multinational enterprises (MNEs) under the Organisation for Economic Co-operation and Development’s (OECD) Two-Pillar Solution. So, MNEs with consolidated global revenues of €750 million or more in at least two of the four preceding fiscal years must pay a minimum tax rate of 15% on profits globally.   The DMTT applies to in-scope MNEs, which refers to MNEs present in the UAE and at least one more foreign jurisdiction. In the UAE, it can be a holding company, joint venture, associate, subsidiary, minor-owners entity, or PE. It also introduces corporate tax incentives, including 30-50% tax credits as research and development incentives, starting on or after 1 January 2026. A refundable tax credit is another incentive effective on 1 January 2025.

Customs Duties in the UAE

Businesses operating in the UAE must pay a 5% customs duty on most goods imported from foreign nations. Goods imported from the Gulf Corporation Council (GCC) countries are treated as local goods, given that 40% of the raw materials used for these commodities originated in the GCC.   Goods exempted from customs duty include live animals, fresh vegetables, fruits and cereals, books, newspapers and magazines, medicines and medical supplies, fresh and chilled meat and fish, and vessels and commercial aircraft.

Stay Compliant, Keep Growing

The UAE’s tax scene for businesses is relatively new and on the lower end. The challenge (particularly for new businesses) is that all applicable taxes to businesses in the UAE are strictly enforced. Non-compliance results in hefty fines, lawsuits, and even operational shutdowns. So, ensure you stay compliant to avoid penalties and thrive continually in the UAE’s flourishing business landscape.   Connect Group can help you navigate the UAE’s corporate tax regime. Our team can handle everything, from applying for the UAE tax registration number and obtaining a Tax Residency Certificate to submitting tax returns accurately and on time for your new business. We can also help.    Disclaimer: The information given here is accurate as of 2025 but subject to change as per new laws, rules, and regulations by the UAE government.