Corporate Tax UAE Rules and Regulations: What Businesses Must Know in 2025

Corporate tax in the United Arab Emirates (UAE) is no longer a future risk on the horizon; it is an active tax law framework, a full UAE CT regime that every organisation must understand. With the introduction of Federal Decree-Law No. 47 of 2022 on the Taxation of Corporations and Businesses (often simply called the CT law), the country moved from a “no tax” narrative to a modern, internationally aligned tax system where tax is levied on business profits at the federal level.

For financial year periods starting on or after 1 June 2023, UAE corporate tax applies to a wide range of corporations and other entities, as well as certain individuals carrying on commercial activities. In 2023, 2024 and 2025, more and more businesses are realising that these corporate tax UAE rules and regulations are not just a legal formality; they directly affect pricing, structuring, funding and long-term planning.

At Young & Right, a Dubai-based advisory firm focused on tax management and compliance, we help businesses interpret this federal corporate tax framework in practical, operational terms so that you can focus on growth while staying fully compliant.

The Legal Framework: Who Makes the Rules on UAE Corporate Tax?

The starting point for understanding corporate tax in the UAE is the network of tax decrees and official decisions that shape the regime.

At the top sits the Ministry of Finance (MoF), sometimes referred to simply as MoF, which designs high-level policy for taxation in the United Arab Emirates. The MoF drafts the key federal decree and decree law texts—such as Federal Decree-Law No. 47 of 2022 on corporate tax and Federal Decree-Law No. 60 of 2023 introducing the Domestic Minimum Top-up Tax (DMTT). These decree-law instruments are the backbone of the direct tax regime.

The Cabinet then issues Cabinet Decision documents that provide important detail: for example, specifying what counts as “qualifying income” for free zones or how certain exemption rules apply. Over time, the Cabinet has approved several decisions that refine the way UAE CT works in different sectors and for different categories of taxable person.

Day-to-day administration lies with the Federal Tax Authority (FTA). The Federal Tax Authority applies the CT law, registers taxpayers, receives every tax return, and enforces regulatory requirements such as filing deadlines and record-keeping. Through public clarifications, guides and FAQs, the FTA explains how the ct rules should be applied in real situations and how tax registration application within a specific timeframe must be submitted.

Together, the Ministry of Finance, the Cabinet, the FTA and various tax decrees form a coherent framework of federal tax rules that govern UAE corporate tax in a clear, documented jurisdiction.

 What Exactly Is Corporate Tax in the UAE?

In the UAE context, corporate tax is a form of direct tax levied at federal level on corporate income (that is, on the net income or profit of a business) arising from commercial activities carried out in the country. It is essentially a type of income tax on businesses, often referred to as federal corporate tax or simply UAE CT.

This is a tax levied on the net results of the business—its accounting profit—rather than on sales alone. In technical terms, it is a tax levied on taxable income, which is derived from net income or profit shown in the financial statements, adjusted according to the CT law.

The UAE introduced this taxation framework partly to align with the OECD and the OECD’s standards on tax transparency and the fight against harmful tax practices, especially under Pillar One and Pillar 2 / pillar two of the international reform agenda. This is why the law also references large MNEs (multinational enterprises), consolidated global revenues, and a minimum effective tax rate for certain groups—topics we will revisit when we discuss DMTT and top-up tax.

In short, corporate tax in the UAE is a structured form of direct tax levied on profit, not on capital or turnover, but the calculation of that profit is tightly defined by ct law and related tax decrees.

 Who Is a Taxable Person – and Who Is Exempt?

The concept of taxable person is central to corporate tax UAE rules and regulations. The law sets out who is subject to the tax, and who is exempt.

 Resident Taxable Persons

A taxable person is generally considered resident for UAE CT purposes if they fall into one of the following:

• A company, LLC, PJSC or other corporations and other entities incorporated in the UAE, whether on the mainland or in a free zone.

• A foreign company with its place of effective management in the UAE.

• A natural person who carries on commercial activities in the UAE above specified revenue thresholds, not merely acting in a personal capacity.

These persons are typically taxable on worldwide corporate income, subject to specific exemption rules, extraction of natural resources carve-outs at Emirate level, and reliefs.

Non-Resident Taxable Persons

A non-resident may still be taxable if they have a permanent establishment in the UAE, if branches of foreign banks operate here, or if they generate certain UAE-sourced transaction-based income. In these cases, the relevant fraction of net income or profit can be subject to the tax under the UAE CT regime.

 Exempt Persons

The CT law recognises certain exempt categories, such as:

• Government entities and some government-controlled companies.

• Entities involved in the extraction of natural resources, which are often taxed at Emirate level instead under separate regimes.

• Certain public benefit organisations, pension funds and qualifying investment funds that meet strict regulatory requirements.

Even where an exemption applies, some of these entities must still submit limited tax return information to the FTA to maintain their exempt status.

 Tax Rates, Thresholds and the Domestic Minimum Top-Up Tax

One major concern for any business is the tax rate. The UAE structure is designed to be simple but competitive:

• 0% on taxable income up to AED 375,000.

• A rate of 9 per cent on taxable income above AED 375,000.

This tax rate pattern is the core federal tax rule for most taxpayers, and it is a central feature of the UAE CT and UAE corporate tax narrative.

For large MNEs, however, international rules under OECD Pillar 2 / pillar two become relevant. To meet the OECD’s requirement that such groups pay a minimum effective tax rate of 15% on consolidated global revenues above EUR 750 million, the UAE introduced the Domestic Minimum Top-Up Tax (DMTT) via a separate decree law. This DMTT is a specific top-up tax that ensures that where the tax levied on the net profit in the UAE is below the global minimum, the difference may be charged as domestic minimum tax.

In practice, this means that while most local SMEs remain focused on the ordinary rate of 9 per cent, large multinational groups must consider both the headline UAE tax rate and the interaction with Pillar 2 and other tax decrees.

What Counts as Taxable Income?

To apply these rates, we must determine taxable income. Under the CT law, this starts with the net income or profit in the financial statements for the relevant financial year. That figure is then adjusted to arrive at the base on which tax is levied.

Adjustments can involve:

• Excluding certain exempt items, such as qualifying dividend income or capital gains that meet the conditions for exemption.

• Adding back non-deductible expenses under taxation rules—for example, some fines or specific entertainment costs.

• Adjusting for loss relief, where prior-year losses can offset current-year taxable income, subject to limits.

Every transaction—from interest on intercompany loans to sale of assets—can influence net income or profit and therefore the tax levied on the net result. This is why a robust accounting environment and clear documentation are crucial for compliance under the CT law.

 Free Zones, Mainland and the Shape of the UAE CT Regime

A common misconception is that free zones are automatically outside UAE CT. In reality, the UAE CT regime distinguishes between mainland entities and free zone entities, but free zone businesses may still be subject to the tax unless they qualify for specific treatments.

Free zone companies that meet substance, activity and income tests can sometimes be treated as “qualifying free zone persons,” enjoying a 0% tax rate on certain qualifying revenue streams. However, non-qualifying income may still be charged at the rate of 9 per cent. The specific criteria are detailed in Cabinet Decision and MoF/FTA public clarifications, which count as interpretative tax decrees.

On the mainland, the ordinary federal corporate tax rules apply widely to commercial activities, with no automatic reduction. Whether you are on the mainland or in a free zone, your entity remains within the same jurisdiction of the federal tax system; the treatment simply differs according to the category of income and compliance with regulatory requirements.

Compliance, Tax Returns and Tax Management

Compliance with corporate tax UAE rules and regulations is not only about understanding the law; it is also about operational discipline.

Every taxable person must:

• Submit a tax registration application within the timeframes defined by the FTA after becoming subject to the tax.

• File at least one annual tax return for each financial year, declaring taxable income for that period.

• Pay the corresponding tax on corporate income by the due date.

For most businesses, the first relevant financial year began in 2023 or 2024, with the regime stabilising further in 2025 as new public clarifications and updated guidance are issued. These ongoing updates ensure better tax transparency and help the UAE avoid being associated with harmful tax practices in the international arena.

For management teams, this means building a proper tax management framework: integrating CT into budgeting, forecasting, and reporting; monitoring revenue flows; documenting related-party transaction terms; and ensuring that both the MoF and FTA requirements are met under the CT law and relevant federal decree instruments.

 Domestic Minimum Top-up Tax (DMTT)

Domestic Minimum Top-up Tax (DMTT) is a 15% “top-up” corporate tax applied to large multinational groups so that their profits in a country are taxed at at least a minimum effective rate. If a group’s effective tax rate in the UAE (or any jurisdiction) on eligible income is below 15%, DMTT allows that country to charge an extra amount of tax (the “top-up”) to bring the total up to 15%. It’s part of the OECD Pillar Two rules and is mainly relevant for multinational enterprises with consolidated global revenues of EUR 750 million or more.

Corporate Tax, OECD Pillars and Global Groups

For many international clients, the interaction between UAE CT, federal corporate tax, and global rules under OECD Pillar 2 is a major concern.

Where a group of MNEs has consolidated global revenues above the threshold, there may be a need to test whether each jurisdiction’s tax rate leads to a minimum effective tax burden of 15%. If the tax levied in a jurisdiction falls short, a top-up tax may be due. The UAE’s DMTT is a domestic minimum mechanism that ensures this happens locally rather than through other countries applying additional tax decrees on UAE-source corporate income.

In this way, the UAE adopts modern taxation standards while remaining attractive to inbound investors, balancing competitive tax rate policy with international compliance and tax transparency expectations.

 Federal Decree by Law Concerning Tax Procedures

The Federal Decree-Law Concerning Tax Procedures (in the UAE) sets out the general procedural rules for all federal taxes, including how taxpayers must register, keep records, file returns, pay tax, handle refunds, and deal with audits, objections, and penalties. It gives the Federal Tax Authority (FTA) its powers (like inspection and assessment) and provides taxpayers with rights and obligations under a single framework, so that VAT, corporate tax and other federal taxes all follow uniform procedures, even though their substantive rules and rates are in separate laws.

 How Young & Right Helps You Navigate UAE Corporate Tax

Young & Right’s role is to turn all of this legal and technical detail into an actionable roadmap tailored to your business.

We assist with:

• Interpreting CT Law and Tax Decrees
We map your activities against the relevant federal decree, decree-law, cabinet decision, and public clarifications, explaining how these tax law provisions apply to your sector and your location (free zone or mainland).

• Structuring and Tax Management
Our team helps you design a CT-ready tax system for your organisation—covering how taxable income is calculated, how commercial activities are tracked, and how each transaction that affects net income or profit is documented.

• Tax Registration and Returns
We prepare and submit your tax registration application within the time limits, set up internal calendars for filing, and support the preparation of every tax return, ensuring your data is aligned with the expectations of the Federal Tax Authority and Ministry of Finance.

• Global and Pillar Two Alignment
For groups worried about Pillar 2, pillar two, DMTT, and minimum effective tax obligations on consolidated global revenues, we evaluate how UAE corporate tax interacts with your wider group taxation profile, including any domestic minimum top-up tax exposure.

• Continuous Compliance and Advisory
Corporate tax is not static. New tax decrees, public clarifications, and updates on federal corporate tax will continue to appear in 2024, 2025 and beyond. We support you in monitoring these changes, updating your internal policies, and remaining fully compliant with all regulatory requirements.

Conclusion: Making Corporate Tax Work for Your Business

The move to a structured federal tax regime in the UAE has fundamentally changed the way businesses think about profit, risk and growth. Corporate tax is now an integral part of the country’s tax system—a form of direct tax levied on the net income or profit of taxable persons across the United Arab Emirates, whether they operate on the mainland or in free zones.

With its mix of federal decree, decree law, tax decrees, Cabinet Decision instruments, and public clarifications, the UAE CT regime may appear complex at first glance. Yet, for organisations that invest in proper tax management, accurate accounting and timely filings, it becomes a predictable cost of doing business rather than a disruptive shock. As global rules under OECD Pillar frameworks and Pillar 2 / pillar two evolve, the UAE’s approach—through instruments such as DMTT and domestic minimum top-up tax—seeks to balance competitiveness with global tax transparency and the rejection of harmful tax practices.

At Young & Right, we work with you to ensure that the tax levied on the net profit in your business is correctly calculated, that every transaction is documented, and that your CT profile supports long-term strategy rather than undermining it. From the first tax registration application within the FTA’s deadlines to ongoing tax return filing and strategic advice, we help you move beyond compliance to clarity—so that corporate tax UAE rules and regulations become a managed, optimised part of your growth story, not an obstacle to it.