Corporate Tax Incentives in the UAE: What to Expect in 2025 and Beyond

Corporate tax is a direct tax charged on the net income or profit of businesses.
In January 2022, the UAE Ministry of Finance announced that a federal Corporate Tax (CT) would be introduced.
This tax will apply to the net profits of businesses either from 1 June 2023 or from 1 January 2024, depending on the financial year each business follows.

Corporate tax in the UAE is governed by Federal Decree-Law No. 60 of 2023.
This law updates the earlier Federal Decree-Law No. 47 of 2022 on taxing corporations and businesses.
All businesses will be subject to UAE Corporate Tax from the start of their first financial year beginning on or after 1 June 2023.

UAE Corporate Tax Rates

According to the Ministry of Finance:

• Taxable income up to AED 375,000 is taxed at 0%.
  
• Taxable income above AED 375,000 is taxed at 9%.

Since its introduction, there have been many updates in CT.
These UAE corporate tax incentives aim to modernize the tax system, make rules clearer, and attract more foreign investment.

Domestic Minimum Top-up Tax (DMTT) 2025

On 9 December 2024, the Ministry of Finance announced a new tax policy called the Domestic Minimum Top-up Tax (DMTT).
It will apply from financial years starting on or after 1 January 2025.
This tax targets multinational companies operating in the UAE that have consolidated global revenues of EUR 750 million or more in at least two of the last four years.

The UAE’s version of DMTT will follow the OECD’s GloBE Model Rules closely.
This is part of the effort to offer tax incentives in the UAE for foreign businesses in 2025 while aligning with international standards.

R&D Tax Incentive Coming in 2026

To promote research and development, the UAE plans a new R&D tax incentive.
On 19 April 2024, the Ministry of Finance launched a public consultation to gather feedback.
Based on this, the new UAE tax incentives for businesses in 2026 are expected to include this R&D benefit starting from 1 January 2026.

The incentive will offer a 30% to 50% tax credit based on the R&D expenses.
It will also be refundable depending on the company’s size and revenue.
This new R&D incentive will work alongside the 0% tax rate for Qualifying Intellectual Property under the Free Zone Tax Regime.

Refundable Tax Credit for High-Value Employment

Another exciting change is the introduction of a refundable tax credit for businesses that create high-value jobs.
This new incentive began on 1 January 2025.
The tax credit will be based on the eligible salary costs of employees involved in important activities, such as C-suite executives and key business leaders.

This incentive is part of future corporate tax incentives in the UAE. It aims to help businesses grow, innovate, and contribute more to the UAE economy.

Small Business Relief

The UAE Corporate Tax Law offers Small Business Relief for eligible businesses until 31 December 2026.
If a business has revenue below AED 3 million for each tax period, it can choose to be treated as if it has no taxable income.
This is a big support for smaller businesses trying to grow.

If a business crosses the AED 3 million mark, normal UAE corporate tax policies will apply at the standard tax rates.
By opting for small business relief, some tax rules will not apply, like exempt income, deductions, tax loss relief, and transfer pricing compliance.

This shows how corporate tax incentives in the UAE are giving businesses more flexibility while they scale up.

Transfers Within a Qualifying Group

The UAE CT Law also provides tax relief for companies transferring assets or liabilities within a qualifying group.
Businesses must meet certain conditions: they should be at least 75% commonly owned, share the same financial year, and use the same accounting standards.

Also, the businesses must be UAE tax residents or non-residents with a permanent establishment in the UAE.
None of the group members can be an exempt entity or a Qualifying Free Zone Person (QFZP).

If conditions change within two years, like a transfer outside the group, the original tax relief can be taken back.

Business Restructuring Relief

Similar to group transfers, the UAE also offers tax relief for bigger moves like mergers, spin-offs, and restructurings.
To qualify, businesses must follow UAE regulations, be residents or have a permanent establishment, and not be exempt entities or QFZPs.

They must also share the same financial year and accounting standards.
Importantly, the restructuring must be done for real business reasons, not just for tax savings. If shares or assets are later sold within two years, the earlier tax relief will be reversed.

Free Zone Tax Regime

There are more than 50 Free Zones in the UAE, and companies there also fall under the Corporate Tax Law.
They must meet normal compliance rules, including following transfer pricing guidelines.

However, if a Free Zone company qualifies as a QFZP, it can enjoy a 0% corporate tax rate on qualifying income.
Income that does not meet the qualifying conditions will be taxed at 9%.

To get the 0% rate, a company must:

• Be registered in a UAE Free Zone.
  
• Maintain enough substance in the Free Zone.
  
• Earn qualifying income.
  
• Not opt into the regular UAE corporate tax regime.
  
• Follow transfer pricing rules.
  
• Keep audited IFRS financial statements.
  
• Meet the de minimis rule for non-qualifying income.
  

If any of these conditions are not met, the company will face a 9% tax rate for five years.
After that, it can apply again to become a QFZP.

Qualifying Investment Funds (QIFs) and Qualifying Limited Partnerships (QLPs)

In 2025, the UAE introduced new changes through Cabinet Decision No. 34.
This update focuses on UAE corporate tax incentives for Foreign Investors.
It replaces the earlier Cabinet Decision No. 81 of 2023 with more flexible, transparent, and investor-friendly rules.

These changes are important for asset managers, REITs, private equity firms, venture capitalists, and international investors.

What Cabinet Decision No. 34 of 2025 Means

Cabinet Decision No. 34 of 2025 gives a clear framework for how QIFs and QLPs are treated under the UAE’s corporate tax system.
It makes compliance easier, offers tax benefits, and provides better exemptions for funds and investors.

This move reflects the UAE’s goal to attract global investments while keeping the system simple and predictable.

Tax Exemptions for QIFs

Under the new rules, a QIF can enjoy corporate tax exemptions if:

• It does not exceed a 10% real estate asset threshold.
  
• It maintains a diverse ownership structure.
  

These conditions make sure that funds are not used to avoid taxes and encourage broad investor participation. 

If a QIF meets these rules, the income earned will not be taxed under UAE Corporate Tax, improving net returns for investors.

Real Estate Asset Threshold Explained

The updated rules also explain how real estate income affects tax exemption:

• If more than 10% of a fund’s income comes from real estate, the excess income becomes partly taxable.
  
• In such cases, 80% of that real estate income will be taxed under corporate tax laws.

This clarification matters a lot for REITs and funds heavily invested in real estate.

More Flexibility in Ownership Rules

Before, if a QIF broke ownership rules even once, it could lose its tax-exempt status.
Now, the new framework gives QIFs a grace period to fix such breaches.

A fund has:

• Up to 90 days each year to correct ownership problems.
  
• Special allowances during liquidation or termination.
  

This shows that future corporate tax incentives in the UAE are designed with real-world business conditions in mind.

Limited Impact from Ownership Breaches

Another good change is that if an ownership breach happens, only the responsible investor loses their tax exemption.
The fund itself keeps its Qualifying status if it meets other conditions.

This keeps funds stable and protects investors who follow the rules.
It’s a smart move to boost trust and fairness in the system.

Tax Rules for REITs

Real Estate Investment Trusts (REITs) also get better treatment under the new rules.
Now:

• Investors will only pay corporate tax on 80% of their real estate income from a REIT.
  

This matches the rules requiring REITs to distribute most of their income to investors.
It adds to the growing list of UAE tax incentives for businesses in 2025 that create a better, clearer system.

Corporate Tax Registration for Foreign Investors

To support global investors, the UAE made corporate tax registration easier for those investing in QIFs or REITs.

Now:

• Foreign investors only need to register for corporate tax when they distribute 80% or more of their income within nine months of year-end.
  

This helps global asset managers and big investors avoid extra paperwork until their earnings are actually realized.

Tax Transparency for Limited Partnerships

Cabinet Decision No. 34 of 2025 also brings in new rules for limited partnerships.
If partners agree, and if the partnership has no legal personality, it can be treated as tax transparent.

This means:

• Income is taxed directly to partners.
  
• The partnership itself is not taxed.
  

This follows best practices seen in countries like the US, UK, and Singapore.
It also shows the UAE’s push to match international standards under UAE corporate tax policies 2025 and beyond.

Family Foundations as Unincorporated Partnerships

On 10 March 2025, the UAE introduced a new application system through “EmaraTax” for Family Foundations.
Eligible foundations can now apply to be treated as an Unincorporated Partnership for corporate tax purposes.

To qualify, the Family Foundation must:

• Register for corporate tax.
  
• Meet specific conditions under the Corporate Tax Law and related decisions.
  

Once approved:

• The foundation will not need to file corporate tax returns anymore.
  
• Individual beneficiaries must check if they need to register and file their own tax returns.

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Disclaimer: The information provided in this blog is for general informational purposes only. For professional assistance and advice, please contact experts.