Corporate Tax in the UAE: What Every Startup Must Know in 2025

Starting a business in the UAE is exciting. With its booming economy, investor-friendly policies, and global connections, the UAE continues to attract thousands of entrepreneurs each year. But in 2025, there’s one topic every startup founder needs to understand clearly: Corporate Tax in the UAE.

Corporate tax is no longer optional knowledge, it’s a legal requirement. From registration deadlines to profit thresholds, knowing the rules can save you from penalties and help you plan for growth. This guide explains everything in simple terms so you can stay compliant and focused on your business.

What Is Corporate Tax in the UAE?

Corporate tax is a direct tax on the profits of businesses. It was introduced in the UAE in June 2023 and applies nationwide. Unlike VAT (which applies to sales), corporate tax is charged on the net profits your company earns after expenses.

The current rate is 9% for taxable profits above AED 375,000. Businesses earning below that threshold are exempt, which is a big advantage for small startups.

Who Needs to Pay Corporate Tax in the UAE?

Not all businesses are affected in the same way. Here’s a quick breakdown:

• Mainland companies – Must register and pay corporate tax if profits exceed AED 375,000.
  
• Free zone companies – Can still enjoy tax incentives, but must comply with conditions (e.g., carrying out “qualifying activities” and meeting substance rules).
  
• Foreign entities – Only taxed if they operate a permanent establishment in the UAE.
  
• Individuals – Income from employment, personal investments, or real estate is not subject to corporate tax.

In short: If your company is making profits from business activities, you likely need to register.

What Are the Corporate Tax Rates in 2025?

• 0% on taxable income up to AED 375,000.
• 9% on taxable income above AED 375,000.
• 15%+ (OECD global minimum tax rules) for certain large multinational companies with revenues above EUR 750 million.

This tiered approach ensures that small businesses and startups get breathing room, while larger firms contribute more.

How to Register for Corporate Tax in the UAE

Setting up correctly is crucial. Here’s a step-by-step overview:

1. Create an EmaraTax account with the Federal Tax Authority (FTA).
   
2. Submit your trade license, incorporation documents, and financial details.
   
3. Receive your Corporate Tax Registration Number (TRN).
   
4. File annual tax returns online within 9 months of your financial year-end.
   
5. Pay your tax liability through the FTA portal.

Failure to register on time can result in fines of AED 10,000.

What Expenses Can Be Deducted from Corporate Tax?

One common question startups ask: Do I pay tax on all revenue or only profit?

The good news is, you only pay on net profit after deducting eligible expenses. These include:

• Salaries and staff costs
• Rent and utilities
• Marketing and advertising expenses
• Depreciation of assets
• Professional and consultancy fees

Personal expenses and fines are not deductible.

Free Zone Companies and Corporate Tax in 2025

Free zones still offer big benefits, but they’re not completely tax-free anymore.

• Qualifying free zone companies can continue to enjoy 0% tax on income from qualifying activities (like trading with foreign markets).
  
• Non-qualifying activities or business with the UAE mainland may attract the standard 9% rate.
  
• Free zone companies must maintain proper substance (physical office, staff, etc.) to enjoy tax exemptions.

This makes choosing the right structure with the help of experts critical.

Why Startups Need to Care About Corporate Tax

Some entrepreneurs think corporate tax only matters once they are profitable. That’s a mistake. Here’s why:

1. Mandatory registration – Even if you’re below the threshold, you must register.
2. Investor confidence – Investors prefer startups that are compliant with UAE tax law.
3. Cash flow planning – Knowing your tax obligations helps you manage growth and avoid surprises.
   
4. Avoiding penalties – Non-compliance can result in heavy fines.
   
5. Long-term sustainability – Building a tax-compliant business creates trust with banks and partners.

Common Mistakes Startups Make with Corporate Tax

• Delaying registration until profits grow.
• Mixing personal and business expenses in accounts.
• Assuming free zone means “completely tax-free.”
• Not keeping proper bookkeeping and audited accounts.
• Ignoring cross-border tax rules for foreign clients.

Avoiding these mistakes can save you money and legal trouble.

Pro Tips for Handling Corporate Tax in the UAE

• Work with a professional accountant or UAE business setup consultant for compliance.
• Keep clean financial records from day one.
• Plan for tax in your cash flow forecasts.
• Choose your company structure (mainland vs free zone) carefully.
• Stay updated with FTA announcements and guidelines.

FAQs About Corporate Tax in the UAE

Q1: When do I need to file my corporate tax return?
Within 9 months of the end of your financial year.

Q2: Do all free zone companies pay 0% tax?
No. Only qualifying activities remain exempt; other income may be taxed.

Q3: Is VAT the same as corporate tax?
No. VAT applies to sales; corporate tax applies to net profits.

Q4: What happens if I don’t register for corporate tax?
You may face a penalty of AED 10,000 for failure to register.

Q5: Can small businesses under AED 375,000 ignore corporate tax completely?
No. You must still register, even if your tax rate is 0%.

Conclusion

Corporate tax in the UAE is here to stay, and for startups, it’s both a challenge and an opportunity. By registering early, keeping accurate records, and seeking expert help, you can turn compliance into a strength.

If you’re planning your business setup in Dubai or anywhere in the UAE, make corporate tax planning part of your strategy from day one.

Explore more with Startup Works. Get expert guidance to stay compliant and focus on what really matters, growing your business.