Five Things Businesses Should Know About The UAE Corporate Tax Reform 2025

Domestic Minimum Top-Up Tax (DMTT) is now in effect

In 2025, the UAE is introducing new corporate tax regulations as part of a major change to its fiscal policy. The changes seek to match the UAE’s tax system with international tax regulations and at the same time, keep the country attractive for business.
From January 1, 2025, the UAE will apply a 15% Domestic Minimum Top-Up Tax (DMTT) to large multinational companies (MNEs). Putting this legislation in place follows the OECD’s Pillar Two initiative, making sure MNEs pay tax on their profits within the UAE. MNEs that generate combined global revenue beyond €750 million across at least two of their financial years are in scope for the DMTT. The main aim of the DMTT is to reduce circumstances where profits can escape taxation and taxes stay collected in the UAE. If no such rule was in place, other jurisdictions might tax UAE business profits which could weaken the country’s position as a business center.

How Free Zone Entities Are Affected

Previously, companies in Free Zone areas did not need to pay taxes in the UAE. According to the new DMTT, members of a multinational firm located in a Free Zone may have to pay the top-up tax if their effective tax rate is less than 15%. Free Zone businesses now have to update their tax strategies so they remain compliant and effective.

Assistance for Small Businesses

Since June 1, 2023, the UAE has provided small businesses with special relief support, up to December 31, 2026. Any UAE resident person whose annual revenues are AED 3 million or lower will not pay corporate tax this year. Nevertheless, Free Zone companies and members of multinational enterprise groups are not included in the relief. Alternative minimum tax relief is chosen by eligible businesses yearly when they file their corporate tax return.

Any business in the UAE should be prepared for the effects of the upcoming 2025 corporate tax reforms

Things to keep in mind are:

• By examining the company’s group structure, multinationals decide if the DMTT method is still right and if any other changes should be made.
• Free Zone Companies have to examine if what they do continues to fit the requirements for tax exemptions or whether changes should be made to remain compliant with the new rules.
• Improving how you document your finances will help you prove your business is following the new tax laws.

In 2025, UAE tax reforms proved they are acting openly and are in line with the global tax rules

Enhanced rules due to these changes provide businesses with an occasion to redesign and streamline their tax strategies to respond to new laws in the UAE.