Introduction

Dubai is known worldwide for its tax-friendly business environment. For decades, companies enjoyed a 0% corporate and income tax regime, which attracted thousands of entrepreneurs, startups, and multinational corporations.

However, in June 2023, the UAE introduced Corporate Tax for the first time in its history. This new tax regime applies to businesses operating in Dubai and across the UAE. Understanding Dubai corporate tax is crucial for companies to remain compliant and avoid penalties.

In this guide, we will cover everything you need to know about corporate tax in Dubai 2025, including rates, exemptions, free zone benefits, filing deadlines, and compliance requirements.

What is Dubai Corporate Tax?

Corporate Tax in Dubai is a federal tax imposed on business profits. It was introduced by the UAE Ministry of Finance in line with international standards to:

• Diversify government revenue beyond oil and tourism

• Enhance business transparency

• Comply with OECD global tax regulations

The tax is administered by the Federal Tax Authority (FTA), which also oversees VAT in the UAE.

Dubai Corporate Tax Rate 2025

The UAE corporate tax framework is one of the most competitive worldwide. Here’s how it works:

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

• 9% Corporate Tax on taxable income above AED 375,000

• Large Multinational Companies (MNCs) falling under OECD’s Pillar Two rules (global turnover above €750 million) are subject to a 15% tax rate

👉 This means most small and medium-sized businesses in Dubai only pay 9% tax on net profit above AED 375,000.

Who is Subject to Dubai Corporate Tax?

Corporate tax applies to:

• Mainland companies in Dubai

• Free zone companies (with specific exemptions – explained below)

• Foreign businesses with a permanent establishment in Dubai

• Individuals engaged in commercial activities (if licensed)

Exemptions from Dubai Corporate Tax

Not all entities are required to pay corporate tax. Exemptions include:

• Natural resource companies (oil, gas, energy) – still taxed under emirate-level rules

• Government entities and wholly-owned subsidiaries

• Charities and public benefit organizations

• Investment funds (subject to approval)

• Pension funds and social security funds

Dubai Free Zone Companies & Corporate Tax

One of the most common questions is: Do Dubai Free Zone companies pay corporate tax?

Answer: Free zone companies enjoy tax benefits, but with conditions.

• 0% tax on qualifying income earned from outside the UAE or from other free zones

• 9% tax applies if income is from business with the UAE mainland (non-qualifying income)

• Must comply with substance requirements (offices, employees, expenses)

Thus, free zones remain attractive but must align with corporate tax compliance.

Corporate Tax Calculation Example

Imagine a Dubai mainland company earns AED 1,000,000 profit in 2025:

• First AED 375,000 = 0% tax

• Remaining AED 625,000 = 9% tax = AED 56,250

Total tax payable = AED 56,250

Filing & Compliance Requirements

To comply with Dubai corporate tax, businesses must:

1. Register with FTA for Corporate Tax

2. Maintain proper accounting records (audited financial statements for some businesses)

3. File tax returns annually within 9 months of the end of the financial year

4. Pay corporate tax liability before the due date

For example, if your financial year ends 31 December 2024, your first corporate tax return is due by 30 September 2025.

Penalties for Non-Compliance

Failure to comply with Dubai’s corporate tax laws can lead to:

• Heavy fines (AED 10,000 – AED 50,000 for late filing)

• Additional penalties for underreporting income

• Business license suspension or blacklisting

Corporate Tax vs VAT in Dubai

Many entrepreneurs confuse Corporate Tax with VAT (Value Added Tax):

• Corporate Tax = Tax on business profits

• VAT = 5% indirect tax on goods and services

👉 A company in Dubai may be subject to both VAT and Corporate Tax, depending on its activities.

Why Corporate Tax is Not a Burden in Dubai

Despite the introduction of corporate tax, Dubai remains one of the most tax-friendly jurisdictions globally:

• Still no personal income tax

• No capital gains tax

• No withholding tax on dividends, interest, or royalties

• Double tax treaties with 140+ countries

• Lowest corporate tax rate in the region (compared to 20–30% globally)

How to Prepare for Corporate Tax in Dubai

1. Assess your business structure – Mainland, free zone, or offshore

2. Register for Corporate Tax with the FTA

3. Maintain accurate bookkeeping

4. Conduct tax planning to minimize liabilities legally

5. Hire a corporate tax consultant for compliance and filing support

FAQs – Dubai Corporate Tax

Q1: Is corporate tax applicable to freelancers in Dubai?
Yes, if they hold a trade license and earn taxable profits.

Q2: Do free zone companies pay corporate tax?
Yes, but only on non-qualifying income (mainland transactions).

Q3: What is the corporate tax rate in Dubai 2025?
0% up to AED 375,000; 9% above AED 375,000; 15% for large MNCs.

Q4: Is corporate tax applicable on dividends?
No, dividends and capital gains are exempt if received from qualifying shareholdings.

Q5: Who administers corporate tax in Dubai?
The Federal Tax Authority (FTA).

Conclusion

The introduction of Dubai corporate tax marks a major shift in the UAE’s financial landscape. While businesses now have to pay up to 9% tax on profits, the UAE still offers one of the most competitive and transparent tax systems worldwide.

For entrepreneurs, SMEs, and multinationals, understanding and complying with corporate tax is essential to avoid penalties. Partnering with Dubai tax consultants can help ensure smooth compliance and effective tax planning.

Dubai remains a global hub for investment and business growth—and with the right corporate tax strategy, companies can continue to thrive in 2025 and beyond.