Corporate Tax in Dubai 2025 | Understanding the New Rules and Filing Process

Dubai is one of the world's most attractive business hubs, offering a favorable environment for both local and international companies. However, as of 2025, a significant shift will occur with the introduction of corporate tax in Dubai, marking the end of the UAE's tax-free status for businesses. This change aligns the UAE with global tax practices and ensures that companies contribute fairly to the economy. In this article, we will walk you through the key aspects of corporate tax in Dubai, including the new rules, the filing process, and essential tips for staying compliant, with insights from Risians Accounting, a trusted accounting firm in Dubai, UAE, and leading corporate tax consultants in Dubai.

Corporate Tax in Dubai 2025: Key Changes and Rules

The introduction of corporate tax in Dubai in 2025 is one of the most significant changes to the country's tax system in recent years. While the change applies to most businesses, the new system includes several exemptions and rules designed to maintain Dubai's appeal as a business-friendly environment.

1. Corporate Tax Rate for Businesses

The new corporate tax rate in Dubai will be 9% for businesses whose annual profits exceed AED 375,000. This is a progressive approach, as businesses earning less than this amount will remain exempt from paying corporate tax. This move ensures that small and medium-sized enterprises (SMEs) are not burdened by taxes, allowing them to continue growing and thriving.

For larger businesses, the 9% corporate tax will apply only to profits exceeding the threshold of AED 375,000. This change aims to balance the needs of small businesses and the contributions of larger corporations to the country's economy.

2. Free Zone Entities and Exemptions

One of the most important aspects of Dubai's new corporate tax system is how it affects businesses operating in the city's free zones. Companies established in free zones that meet certain criteria will continue to benefit from tax exemptions. However, these businesses must meet specific conditions, such as maintaining a certain level of economic activity and adhering to the regulations set by the free zone authority.

It is important for businesses in free zones to ensure they comply with these regulations to continue benefiting from tax exemptions. Corporate tax consultants in Dubai can help businesses navigate these rules and stay compliant while maximizing the advantages offered by the free zones.

3. Tax on Foreign Companies with Permanent Establishments

Foreign companies with a permanent establishment (PE) in Dubai will also be subject to corporate tax starting in 2025. A permanent establishment refers to any physical presence or operations that a foreign business has in the UAE, such as offices, branches, or subsidiaries. If a foreign company is engaged in business activities in Dubai, it will be required to pay corporate tax on any profits earned within the UAE.

Foreign companies with a permanent establishment must consult with experts to ensure they are in compliance with the new rules, as the tax laws for foreign businesses differ from those for local companies.

4. Transfer Pricing Rules

To prevent the shifting of profits between subsidiaries and related entities, Dubai will implement transfer pricing rules starting in 2025. These rules aim to ensure that transactions between related entities are priced in a way that reflects market conditions, helping to maintain fair taxation and preventing businesses from artificially lowering their tax liabilities through internal transactions.

Compliance with transfer pricing rules will require businesses to maintain detailed documentation of intercompany transactions and justify their pricing strategies. Working with corporate tax consultants in Dubai will help ensure that your business meets these compliance requirements.

5. Withholding Tax on Payments to Foreign Entities

The introduction of corporate tax also brings about withholding tax on certain payments made by UAE-based businesses to foreign entities. These payments include royalties, interest, and dividends. The new rules aim to ensure that foreign companies making money from the UAE are properly taxed on their earnings. It is important for businesses to stay updated on these rules and ensure that they are withholding the correct amounts on cross-border transactions.

Filing Corporate Tax in Dubai: A Step-by-Step Guide

With the introduction of corporate tax, businesses in Dubai will now have to adhere to a formal tax filing process. The steps for filing corporate tax in Dubai are straightforward but require attention to detail. Below is a step-by-step guide to help your business navigate the process:

1. Register with the UAE Federal Tax Authority (FTA)

The first step in filing corporate tax in Dubai is to register your business with the UAE Federal Tax Authority (FTA). Registration is necessary to obtain a tax identification number (TIN), which is required for all tax filings. The FTA registration process is completed online, and once your business is registered, you will receive a TIN that must be used for all future tax-related transactions.

2. Maintain Accurate Financial Records

Keeping accurate financial records is essential to ensure that your business complies with corporate tax regulations. Proper record-keeping allows businesses to calculate their taxable income, track expenses, and claim legitimate deductions. As part of your tax filing process, you will need to submit audited financial statements, so it is crucial to maintain up-to-date and accurate records throughout the year.

Working with an accounting firm in Dubai, UAE, like Risians Accounting, can help ensure that your financial records are properly maintained and in compliance with the FTA's requirements.

3. Prepare Your Corporate Tax Return

Once your records are organized, the next step is to prepare your corporate tax return. Your tax return will need to include information on your company's income, expenses, and profits for the relevant financial year. You will also need to include any supporting documents, such as your audited financial statements, as well as details of any eligible tax deductions or exemptions.

4. Submit Your Tax Return to the FTA

Corporate tax returns must be submitted electronically through the FTA's online portal. Businesses must ensure that they submit their returns on time to avoid any penalties. The FTA will issue a notice confirming receipt of your return. If any issues or discrepancies are identified, they will contact you to request clarification or additional documentation.

5. Pay Your Corporate Tax

After submitting your tax return, the FTA will calculate the amount of corporate tax due and send you a payment notice. Businesses must pay the amount by the specified deadline to avoid penalties or interest charges. Payments can be made online via the FTA portal.

Why Consult with Corporate Tax Consultants in Dubai?

The new corporate tax system in Dubai may seem complex, especially for businesses that have never dealt with tax filing before. Corporate tax consultants in Dubai can offer several advantages, such as:

• Expert Guidance: Tax consultants can guide your business through the complexities of the new tax laws and help you develop a strategy to minimize tax liabilities.
• Compliance Assistance: A corporate tax consultant ensures that your business stays compliant with all filing deadlines, tax regulations, and reporting requirements.
• Transfer Pricing Support: For businesses with international operations, tax consultants can help you navigate transfer pricing rules and ensure that your cross-border transactions are appropriately priced and documented.
• Ongoing Support: The corporate tax landscape is subject to change, and working with a consultant ensures that your business remains up-to-date with any future modifications to tax laws.

Conclusion

The introduction of corporate tax in Dubai in 2025 will bring significant changes for businesses, but with proper planning and the right guidance, companies can navigate this transition smoothly. By understanding the rules and following the filing process, businesses can stay compliant with the new tax system and continue to thrive. Working with an experienced accounting firm in Dubai, UAE, like Risians Accounting, ensures that your tax filings are accurate and your business remains compliant with all regulatory requirements.

If you have any questions or need assistance with your corporate tax filings, don't hesitate to reach out to Risians Accounting. As trusted corporate tax consultants in Dubai, we are here to help your business stay on top of the new tax laws and ensure a smooth transition into the 2025 tax year.

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