Thought Leadership: Dubai’s Corporate Tax Revolution: What Business Leaders Must Know Now

Written By: Lyle Malander

Date: 04 June 2025

Introduction: A Landmark Shift in the UAE’s Business Landscape

Between 2022 and 2025, the UAE transitioned from a famously low-tax jurisdiction to one of the most progressive tax environments in the Gulf region. This seismic shift represents more than just new fiscal policy – it’s a broader realignment with global economic standards, investor expectations, and long-term national development goals.

For businesses operating in Dubai – from global conglomerates to agile startups – the implications are significant. Navigating this transformation demands not just compliance, but strategic foresight.

This article outlines what has changed, how it’s impacting businesses and sectors, where things are heading next, and how Malander supports clients through the evolving landscape.

Timeline of Key Tax Milestones in the UAE (2022–2025)

• January 2022: UAE Ministry of Finance announces federal Corporate Income Tax (CIT) at 9% on profits above AED 375,000.
• December 2022: Federal Decree-Law No. 47 of 2022 published, confirming CIT.
• April 2023: Ministerial Decision No. 73 introduces Small Business Relief – 0% CIT for businesses with ≤ AED 3M in revenue.
• May 2023: Cabinet Decision No. 55 defines “Qualifying Income” for Free Zone businesses (de minimis threshold, substance conditions).
• June 2023: CIT becomes effective for financial years beginning on or after 1 June 2023. Tax registration begins via the Federal Tax Authority (FTA).
• October 2023: Transfer Pricing guidelines released, aligned with OECD standards.
• November 2023: UAE confirms implementation of OECD Pillar Two – Domestic Minimum Top-Up Tax (DMTT) at 15% for large multinationals starting 1 January 2025.
• January 2025: DMTT becomes effective for MNEs with global consolidated revenue ≥ €750 million.

1. Corporate Income Tax (CIT): 9% From 2023

Businesses with annual net profits exceeding AED 375,000 are now taxed at 9%, one of the lowest corporate rates globally – but a monumental change in the UAE context.

• Profits below this threshold remain untaxed to protect startups and smaller firms.
• All UAE entities (mainland and Free Zones) must register and file with the FTA.

Why it matters: Businesses accustomed to zero-tax models must now establish formal tax governance frameworks, update their chart of accounts, and implement new financial reporting processes.

2. Small Business Relief: A Lifeline Until 2026

To support the entrepreneurial ecosystem, the Ministry introduced a 0% tax rate through 2026 for entities with annual revenues up to AED 3 million.

• Applies only to mainland entities (not Free Zones).
• Offers breathing room for startups and small operators to adapt gradually.

Strategic implication: Businesses near the threshold must consider tax planning strategies – e.g., deferring revenue, revising business models, or segmenting operations – to remain eligible.

3. Free Zones: Still 0% – But With Strings Attached

Dubai’s Free Zones can retain their 0% CIT advantage if strict conditions are met:

• Income must qualify as “Qualifying Income” (e.g., foreign-sourced or intra-Free Zone).
• Mainland transactions must be < 5% of total income or AED 5 million (de minimis).
• Economic substance requirements must be fulfilled.
• Detailed record-keeping and segregation of activities is essential.

What this means: Free Zone entities can no longer rely on blanket exemptions. Businesses must regularly assess whether they’re drifting into non-qualifying activity, which would trigger the full 9% rate.

4. Transfer Pricing (TP): OECD-Aligned Compliance Now Required

Effective October 2023, all businesses with related-party transactions must comply with Transfer Pricing rules:

• Apply arm’s length principles to all related-party dealings.
• Prepare Master Files and Local Files annually (based on size thresholds).
• Submit Disclosure Forms during tax return filing.

Impact: Many businesses will need to overhaul how intercompany transactions are priced, documented, and disclosed – especially those with regional or global affiliates.

5. Domestic Minimum Top-Up Tax (DMTT): 15% for Multinationals From 2025

From January 2025, UAE introduces its version of the OECD’s Pillar Two framework:

• Applies to Multinational Enterprises (MNEs) with global revenue ≥ €750M.
• If UAE effective tax rate < 15%, a top-up tax will apply.
• Affects both Free Zone and mainland entities within qualifying groups.

Insight: This measure aims to protect UAE tax sovereignty. Without it, other countries could impose a top-up tax on UAE operations under OECD rules. Implementation will require precise ETR (Effective Tax Rate) calculations and coordination across jurisdictions.

Economic Impact: High-Level Sectoral Analysis

The tax shift has reshaped the operating environment. Here’s how it’s playing out across key sectors:

Real Estate

• Large property developers now fall under 9% CIT.
• Offshore structuring is more heavily scrutinized.
• Tax deductibility of depreciation and financing costs has become a critical planning area.
• Net impact: Moderately negative in short term, but increases investor confidence via transparency.

Financial Services

• Banks and investment firms must now comply with CIT, TP, and DMTT rules.
• Increased audit activity from the FTA expected.
• Regulatory compliance burden rising (especially for groups with offshore financing arms).
• Net impact: High initial admin costs, but enhances sector maturity.

Technology & Startups

• Protected under Small Business Relief.
• Still attractively taxed for investors (especially in Free Zones).
• However, need to track global MNE status if part of VC or PE portfolios tied to large groups.
• Net impact: Still attractive, but strategic tax planning is now essential.

Logistics & Trade

• Customs, transfer pricing, and Free Zone qualification tightly linked.
• Need to segregate trading activity carefully to maintain 0% CIT where possible.
• Net impact: Requires deeper operational planning but still competitive.

What Lies Ahead: Predictions and Strategic Considerations

The UAE’s tax reforms are not over. Businesses should anticipate:

• Stricter enforcement: The FTA is actively ramping up audits and compliance monitoring.
• Increased disclosure requirements: Further integration with OECD BEPS standards will tighten reporting obligations.
• More double taxation treaties (DTTs): Facilitating foreign investment and bilateral cooperation.
• Potential sector-based incentives: Particularly for renewable energy, R&D, AI, and tech startups.
• Long-term benefits: Enhanced investor confidence, global tax compliance credibility, and better public service funding.

Challenges Businesses Must Address Now

• Compliance Burden: Businesses must overhaul internal finance functions to handle tax filings, disclosures, and documentation.
• Cash Flow Management: Previously “tax-free” cash flow now needs to account for CIT, affecting dividend planning and reinvestment cycles.
• Systems Integration: Many businesses lack the ERP or accounting infrastructure to track revenue thresholds, related-party transactions, and qualifying income rules.
• Board-Level Awareness: Directors must be educated on tax implications – especially in Free Zone boards used to operating with minimal oversight.

How Malander Supports Businesses in the UAE

Malander Advisory works with regional and international companies to build robust finance, and governance frameworks that align with UAE’s evolving standards. We help clients with:

• Audit Readiness: We help ensure your financial records, disclosures, and documentation meet the standards required for tax audits, reducing exposure to penalties and delays.
• Outsourced Finance Function: From bookkeeping to full controllership, our outsourcing solutions help you stay compliant and efficient, freeing up internal bandwidth to focus on growth.
• Interim CFO Services: For businesses navigating growth or internal transitions, we offer experienced CFOs who can lead your finance function through tax implementation, system upgrades, and board reporting.

Conclusion: Adaptation as a Strategic Advantage

Dubai’s transition from a tax haven to a regulated, OECD-aligned jurisdiction is a progression. The reforms signal a maturation of the UAE’s economy and an invitation to long-term, value-driven investment. 

For forward-thinking CFOs, founders, and investors, the message is clear: tax compliance is no longer a checkbox – it’s a competitive differentiator.

Partner with Malander to navigate this tax revolution with confidence, clarity, and compliance, and unlock your business’s full potential in one of the world’s most dynamic markets.