The United Arab Emirates (UAE) has introduced significant changes to its corporate tax framework, effective from January 1, 2025, to align with international standards and promote economic diversification. Here's an overview of the key updates:Middle East Briefing+2Millennial Partners+2Reuters+2
🇦🇪 UAE Corporate Tax Structure (Effective January 1, 2025)
1. Standard Corporate Tax Rate
A 9% tax rate applies to taxable income exceeding AED 375,000.
Income up to AED 375,000 is exempt from tax, supporting small businesses and startups. Ministry of Finance+3Arabian Business+3Millennial Partners+3
2. Domestic Minimum Top-up Tax (DMTT)
A 15% minimum tax rate is imposed on large multinational enterprises (MNEs) with consolidated global revenues exceeding €750 million (approximately AED 3 billion) in at least two of the four financial years preceding the tax's commencement.
This measure aligns with the OECD's Global Anti-Base Erosion (GloBE) Model Rules, ensuring that MNEs pay a minimum effective tax rate of 15% on profits in each country where they operate. Corporate Taxation+5Reuters+5Middle East Briefing+5Corporate Taxation+4Middle East Briefing+4Economy Middle East+4
3. Free Zone Entities
Entities operating exclusively within designated free zones and not conducting business with the UAE mainland may benefit from a 0% corporate tax rate or exemptions for up to 50 years, depending on the specific free zone regulations.
However, all free zone entities are required to register and file an annual corporate tax return. HSBC Business - Your partner for growth+1Filings+1
💡 Proposed Tax Incentives (Subject to Legislative Approval)
1. Research and Development (R&D) Tax Credit
A refundable tax credit ranging from 30% to 50% is proposed for businesses engaged in qualifying R&D activities within the UAE.
The incentive aims to encourage innovation and economic growth, with implementation expected for tax periods starting on or after January 1, 2026. Economy Middle East+4Middle East Briefing+4Economy Middle East+4Middle East Briefing+2Economy Middle East+2Economy Middle East+2
2. High-Value Employment Incentive
A refundable tax credit is under consideration for businesses employing senior professionals, including C-suite executives and other key personnel engaged in core business functions that significantly contribute to the UAE’s economic competitiveness.
This incentive is proposed to take effect on January 1, 2025, and will be granted as a percentage of eligible salary costs for employees engaged in high-value employment activities. Middle East Briefing+1Economy Middle East+1Reuters+2Economy Middle East+2Middle East Briefing+2
✅ Key Takeaways
Small and Medium Enterprises (SMEs): Businesses with taxable income up to AED 375,000 are exempt from corporate tax, supporting entrepreneurship and growth.
Large Multinationals: MNEs meeting the €750 million revenue threshold are subject to the 15% minimum tax rate, aligning the UAE with global tax standards.
Free Zone Entities: Entities operating within free zones may benefit from tax exemptions, provided they comply with specific regulations and do not engage in mainland business activities.
Incentives for Innovation and Employment: Proposed tax credits aim to foster R&D and attract high-value talent, enhancing the UAE's position as a global business hub.Arabian Business+3Ministry of Finance+3Millennial Partners+3Economy Middle East+4ebs+4Corporate Taxation+4Filings+2Millennial Partners+2HSBC Business - Your partner for growth+2Economy Middle East+4Middle East Briefing+4Economy Middle East+4
For businesses operating in the UAE, it's crucial to assess eligibility under the new tax provisions and consider the potential impact on financial planning and compliance.Middle East Briefing