UAE Announces New Tax Rules: What Businesses Need to Know in 2025

The UAE has officially introduced new tax rules for 2025, marking a significant shift in its financial and regulatory environment. These updates are part of the country’s broader strategy to align with global tax standards while supporting economic growth and transparency.

Key Highlights of the New Tax Rules:

1. Corporate Tax Implementation
   For the first time, the UAE will implement a federal corporate tax of 9% on businesses earning more than AED 375,000 annually. This rule is set to take effect in 2025 and applies to mainland companies and certain free zone businesses that do not meet qualifying criteria.

2. Transfer Pricing Regulations
   Businesses engaging in transactions with related entities will now need to comply with OECD-aligned transfer pricing rules. This includes maintaining proper documentation to justify pricing arrangements and prevent tax avoidance.

3. Tax Residency and POEM
   The Place of Effective Management (POEM) principle now plays a key role. If a business is managed and controlled from the UAE—even if registered abroad—it could be considered a UAE tax resident and subject to local corporate tax laws.

4. Free Zone Clarity
   While free zone companies can still benefit from 0% corporate tax, they must meet specific criteria such as conducting only qualifying income activities and avoiding business with mainland companies.

5. Foreign Tax Credit
   To prevent double taxation, businesses can claim foreign tax credits for taxes paid abroad, which will offset their UAE corporate tax liabilities.

Why This Matters for Businesses

These new rules promote transparency and fairness while helping the UAE align with international tax frameworks, such as the OECD’s Base Erosion and Profit Shifting (BEPS) project. Businesses now have clear compliance obligations and should start reviewing their financial structures to adapt accordingly.

Preparing for the Changes

Businesses are encouraged to:

• Register for corporate tax on the EmaraTax portal

• Assess their financial year timelines for registration and filing deadlines

• Consult with tax advisors to ensure compliance and efficiency in reporting

Final Thoughts

The UAE’s new tax rules reflect a maturing economy ready to compete globally with a robust and transparent financial system. Startups, SMEs, and large enterprises must stay informed and proactive in order to thrive in this evolving landscape.