Understanding the UAE's 2025 Corporate Tax Review

April 30, 2025

UAE’s 9% corporate tax might still feel new—it only kicked in for most companies recently. But heads-up: a government review is happening this year, and it could reshape how businesses get taxed. Whether you're operating from a free zone or on the mainland, now’s the time to check if your structure still makes sense.

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Where Corporate Tax Stands in the Emirates Right Now

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9% tax on profits above AED 375,000 (USD 102,000)
0% tax for qualifying free zone companies that meet substance and activity tests (side income must stay below AED 5M or 5%)
15% DMTT for multinational groups with revenue over AED 3.2B
Small Business Relief: zero tax for firms earning less than AED 3M (until end of 2026)
0% withholding tax on dividends, interest, and service fees (no extra filings)

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What Might Shift in the UAE Tax System

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The 2025 review might lead to new sector-based incentives, such as:

Tax credits for R&D, clean energy, and high-value employment
Tougher conditions for what counts as a "qualifying" free zone activity
Support for tax group formation and loss carryforward
Lower transfer pricing documentation thresholds for SMEs
More action on anti-abuse rules for tax structuring

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Corporate Tax Moves UAE Businesses Should Make in 2025

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1. Set Up a Tax Group

If your companies share 95% ownership and have the same year-end, consider forming a tax group. It simplifies filings and lets you offset profits and losses.

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2. Ring-Fence Risky Business

Move high-risk or loss-making activities into SPVs or separate entities. This protects your main business and makes compliance clearer.

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3. Shift IP to a Free Zone SPV

IP-holding companies in qualifying free zones can enjoy 0% tax on royalties. The main business can deduct royalty expenses at 9%.

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4. Apply the Participation Exemption

If your business owns at least 5% of another company for 12 months, you might be exempt from tax on dividends and capital gains—if that entity pays tax in its home country.

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5. Get Transfer Pricing in Shape

Document all related-party transactions. Prepare agreements. Benchmark fees. Follow the FTA's Master and Local file format to avoid surprises in audits.

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Common Corporate Tax Mistakes in the Emirates

Splitting companies just to claim more AED 375K tax-free thresholds
Creating fake substance (staff on paper only)
Circular service fees with no business logic
Accidentally creating a UAE permanent establishment
Missing tax deadlines and facing penalties

Corporate Tax Timeline for UAE Businesses in 2025

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Q2: If you're unregistered, do it now and cap your fine at AED 10,000. Map out your tax exposure and related-party flows.

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Q3: Complete mergers or restructures. Build your transfer pricing files.

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Q4: File your first CT return (for calendar-year firms, it’s due by 30 September 2025).

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Q1 2026: Apply any changes from the MoF review, like new credits or free zone updates.

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Why Corporate Tax in the UAE Is Still Attractive

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Even with more rules, the UAE remains one of the most tax-friendly business hubs worldwide. The 0% free zone days may be fading, but there are still big benefits for companies that plan well, stay compliant, and show real operational substance.

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Get UAE Corporate Tax Support from Alpha Pro Partners

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At Alpha Pro Partners, we help founders and finance teams get corporate tax right—from Small Business Relief to transfer pricing, free zone setup, and beyond.

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📩 Reach out for a free consultation—we’ll help you stay ahead of the 2025 changes.

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Frequently Asked Questions (FAQ)

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Is corporate tax applicable to all companies in the UAE?

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Most businesses are subject to 9% corporate tax on profits above AED 375,000, except those qualifying under Small Business Relief or certain free zone incentives.

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