A Complete Guide for Businesses Operating in the UAE

The introduction of corporate tax in UAE marked a historic shift in the region’s business environment. As of 2025, the framework has matured with new rules such as the Domestic Minimum Top-Up Tax (DMTT), stricter transfer pricing documentation, and fresh guidance for free zones and partnerships.

This handbook provides a step-by-step compliance roadmap, designed as a practical reference for business owners, CFOs, and tax professionals in the UAE.

Why This Matters in 2025

  • Global Alignment: UAE corporate tax aligns with OECD global tax standards.
  • Rising Complexity: DMTT, transfer pricing, and free zone clarifications require deeper compliance.
  • Risk of Penalties: Non-compliance can mean hefty fines up to 200% of unpaid tax.
  • Business Growth: Proper tax planning helps businesses optimize structure and avoid financial surprises.

UAE Corporate Tax Compliance Checklist 2025

1. Registration & Basic Compliance

  • Register with the Federal Tax Authority (FTA) well before your first return deadline.
  • Obtain a Tax Registration Number (TRN).
  • Confirm your financial year—align it with group reporting if relevant.
  • Keep your trade license and MoA updated.
      2025 Tip: FTA has introduced penalty waivers for certain late registrations; check eligibility before applying.

2. Determine Taxable Person Status

  • Classify your business as Resident or Non-Resident.
  • Identify Permanent Establishments (PEs) if you’re a foreign entity.
  • Confirm Qualifying Free Zone Person (QFZP) status and meet substance requirements.
  • Review if exemptions apply (e.g., government bodies, natural resource companies, family foundations).
     2025 Update: Unincorporated partnerships can now opt for entity-level taxation, simplifying filings and relief claims.

3. Income Determination

  • Start with IFRS-based accounting profit.
  • Adjust for non-deductible expenses (fines, donations, dividends).
  • Deduct exempt income (qualifying dividends, foreign PE income).
  • Apply Small Business Relief if revenue < AED 3 million.
    Pro Tip: Keep a tax adjustment reconciliation file to bridge accounting vs taxable profit, FTA often reviews this during audits.

4. Tax Adjustments

  • Interest limitation: max 30% of EBITDA.
  • Entertainment expenses: only 50% deductible.
  • Elect treatment for unrealized gains/losses.
  • Align depreciation/amortization with IFRS, unless overridden.
    2025 Update: Ministerial guidance issued on fair value assets & impairment adjustments, review before filing.

5. Special Regimes

Free Zone Companies

  • Maintain substance (staff, premises, expenditure).
  • Qualifying Income: 0% tax rate.
  • Non-Qualifying Income: taxed at 9%.
     2025 Update: Free zone businesses can expand into mainland UAE with proper licensing, but must keep separate books.

Domestic Minimum Top-Up Tax (DMTT)

  • Effective Jan 2025 under OECD Pillar Two.
  • Applies to MNEs with global revenues > EUR 750M.
  • Ensures effective minimum 15% tax rate.
     Action Point: Review global structures – DMTT may trigger additional liabilities even if UAE corporate tax is 0% or 9%.

Group & Restructuring Relief

  • 75% ownership required for group relief.
  • Eligible groups may file as a consolidated tax group.
  • Restructuring relief applies to qualifying mergers and reorganizations.

6. Transfer Pricing (TP)

  • Identify related-party transactions.
  • Apply the Arm’s Length Principle.
  • File the TP Disclosure Form with your return.
  • Maintain Local File and Master File if thresholds apply.
     2025 Update: Threshold for mandatory economic analysis reduced, transactions > AED 200M require detailed benchmarking.

7. Withholding Tax (WHT)

  • Currently 0% withholding tax on cross-border payments.
     Tip: Monitor future law updates, as WHT could be introduced with treaty-driven adjustments.

8. Tax Return Filing

  • File the annual corporate tax return within 9 months of FY-end.
  • Pay tax liability within the same 9-month window.
  • Prepare audited financial statements if required by law.
     2025 Update: All FY2024 returns (due in 2025) must be supported by audited accounts, delays could block filing access.

9. Record Keeping

  • Maintain records for at least 7 years (digital records allowed).
  • Archive contracts, invoices, ledgers, tax elections, TP documentation. 

Pro Tip: Use cloud accounting systems integrated with FTA requirements for compliance efficiency.

 

10. Penalties & Risk Management

  • Late registration: AED 10,000 (waivers possible in 2025).
  • Late filing: AED 500/month, escalating thereafter.
  • Incorrect return/disclosure: up to 200% of tax underpaid.
     Action Point: Create a corporate tax compliance calendar—covering audits, filings, and payments.

Key 2025 Updates Businesses Must Not Miss

  1. 15% Domestic Minimum Top-Up Tax (DMTT) for multinationals (OECD Pillar Two).
  2. Free Zone businesses permitted limited mainland operations with licensing.
  3. Unincorporated partnerships now eligible for entity-level taxation.
  4. Mandatory audits for FY2024 onwards.
  5. Transfer pricing analysis thresholds lowered, requiring stronger documentation.

Practical Tips for Businesses

  • Start early: Don’t wait until filing season—plan quarterly.
  • Segregate free zone vs mainland accounts to avoid non-qualifying tax leakage.
  • Benchmark TP transactions using OECD guidelines.
  • Train finance teams on FTA portal updates and electronic compliance.
  • Run a mock FTA audit annually to test compliance.

The UAE has emerged as a tax-friendly but compliance-driven economy. With corporate tax at 9%, the new 15% DMTT, and tighter reporting standards, businesses can no longer rely on minimal documentation. 

This 2025 Corporate Tax Handbook is designed to help companies stay compliant, minimize risks, and leverage opportunities in the UAE’s evolving tax landscape. By using this as your corporate tax compliance playbook, you’ll not only avoid penalties but also build a tax-efficient, future-ready business.

Contact Hallmark Auditors to know more!