UAE company compliance, legal and accounting, and tax considerations in 2025

UAE Tax System Overview

Tax Type	Rate	Details
Corporate Tax	9%	Applicable from 1 June 2023
Income Tax	0%	No personal income tax for UAE residents
Capital Gains Tax	0%	No tax on capital gains
Withholding Taxes	0%	No withholding taxes for foreign transactions
VAT	5%	Applies to UAE VAT-registered clients and multinational services
DTAs	>110	More than 110 Double Taxation Agreements signed globally

UAE Taxation

Personal Income Tax: The UAE does not impose personal income tax. Additionally, there are no withholding taxes.

Corporate Income Tax: A 9% Corporate Income Tax applies to businesses across all Emirates.

Value Added Tax (VAT): The UAE applies a 5% VAT rate, with exemptions for specific categories such as:

• Exemptions: Food items, health, education, petroleum products, social services, bicycles.
• Residential Real Estate: Financial and residential real estate services enjoy certain VAT exemptions.
• Registration Threshold: Businesses must register for VAT if taxable supplies exceed AED 375,000. Voluntary registration is available for businesses exceeding AED 187,500.

Import Duty: A 5% tax on imports to the mainland UAE applies to all trading companies, regardless of business activities.

Free Zone Exemption: Companies in free zones are exempt from import duty on goods entering and staying within the free zone.

Real Property Transfer Tax: This tax is 4%, split equally between buyer and seller.

Excise Tax: Applies to carbonated beverages, energy drinks, and tobacco products.

Industry-Specific Taxation:

• Oil and Gas: Tax rates vary based on specific government agreements.
• Petrochemical Companies: Taxed similarly to oil and gas, depending on concession agreements.
• Foreign Bank Branches: Generally taxed at a flat rate of 20%.

Municipality Tax: In most Emirates, a municipality tax on properties is levied based on annual rental value.

• Dubai: Commercial properties incur a 5% municipality tax, payable by property owners.
• Residential Properties: Typically subject to a 5% tax, payable by tenants.

Social Security Contributions: For UAE nationals, contributions are set at 20% of the employee's gross salary as per local employment contracts:

• Employee Contribution: 5%
• Employer Contribution: 12.5%
• Government Contribution: 2.5%

eDirham System: Introduced in 2020, the eDirham system streamlines state fee collection and offers modern payment options for government services.

Tax Reporting, Accounting, and Auditing Considerations

Corporate Income Tax Registration: UAE companies must register for Corporate Income Tax within three months of incorporation. Annual declarations are required, even for offshore companies exempt from corporate tax.

VAT Compliance:

• Invoicing: In accordance with the UAE VAT law, a 5% VAT is applied to invoices issued to UAE-based clients that are VAT-registered or require UAE-based services.
• Exemption for Multinational Clients: Sales invoices to multinational clients based outside the UAE are zero-rated.

VAT Returns: Filed monthly or quarterly, depending on turnover, and due by the 28th of the month following the reporting period.

Annual Financial Statements: All companies must prepare financial statements as per IFRS/IAS standards. These must be filed with UAE authorities. Clients may need an annual audit, depending on the Emirate.

UAE VAT and Corporate Income Tax (CIT) Requirements

VAT Registration

VAT registration is mandatory when a business's taxable supplies and imports, including goods and services sold or imported, exceed the threshold of AED 375,000. However, businesses can also voluntarily register for VAT if the sum of their taxable supplies, imports, or expenses surpasses AED 187,500.

Corporate Income Tax (CIT) Registration

All taxable entities must register for UAE Corporate Tax within three months of company or branch registration. This includes complying with the corresponding implementing decisions. The UAE Corporate Tax registration requirement encompasses all businesses, regardless of whether they are subject to a 0% or 9% tax rate.

VAT Filing

With a general VAT rate of 5%, businesses in the UAE must file their VAT returns with the Federal Tax Authority within 28 days after the end of their respective tax period. The specific tax period depends on the business type:

• Monthly for businesses with a turnover of AED 150 million or more.
• Quarterly for businesses with a turnover below AED 150 million.

This filing schedule helps determine the timeframe for tax calculation and payment.

CIT Filings

Under the UAE Corporate Tax Law, all taxable persons must file and, where necessary, pay corporate tax returns within nine months after the close of the applicable tax period. This requirement applies regardless of whether the entities are taxed at a 0% or 9% rate.

Financial Statements

Companies must submit their financial statements within 90 days after the end of each financial year. Depending on the company size or type, these financial statements may need to be audited, while some companies may qualify for exemptions. The first financial year post-incorporation must be between six and 18 months. Companies may request an extension for the submission of these reports, and depending on the location of the company, an audit may be required.

Penalty for Non-Submission of Tax Documents

Penalty Type	Penalty Amount
Failure to keep the required records and other information specified in the tax laws	AED 10,000 for each violation, or AED 20,000 in each case of a repeated violation
Failure to submit data, records, and documents related to Tax in Arabic to the Federal Tax Authority (FTA)	AED 5,000 for each violation
Failure to file a Tax Return within the specified timeframes	AED 500 for each month (or part thereof) for the first 12 months, and AED 1,000 for each month (or part thereof) from the 13th month onwards
Failure to settle the Payable Tax	A monthly penalty of 14% per year, calculated based on the unpaid tax amount from the due date until payment is made.
Submitting an incorrect Tax Return	AED 500 unless the Tax Return is corrected before the deadline for submission

UAE Company Taxation and Compliance Guide

UAE Company Tax Exemption Package

Double Taxation Avoidance: The UAE has Double Taxation Avoidance Agreements (DTAA) with more than 90 countries, including Canada, China, France, India, and Singapore. These agreements help businesses avoid being taxed twice on the same income, thus reducing tax burdens, enhancing profitability, and encouraging cross-border investment and trade.

Taxation of Supplies: All supplies of goods and services made in the UAE are taxable. However, over 20 free zones are treated as designated free zones under VAT law, subject to specific conditions, including geographic fencing, customs monitoring, internal procedures for goods management, and compliance with Federal Tax Authority (FTA) procedures:

• Geographic Area: Must be a specific fenced area.
• Security and Customs: Customs controls must monitor the entry and exit of individuals and goods.
• Internal Procedures: Keeping, storing, and processing goods must follow specific procedures.
• FTA Compliance: The operator must comply with Federal Tax Authority (FTA) procedures.
• VAT Application: The area is treated as outside the UAE for VAT purposes only when all criteria are met; otherwise, regular VAT rules apply.

UAE Company Legal and Compliance Considerations

Dual Legal System: The UAE legal framework combines Islamic Shariah law and conventional law, ensuring a flexible and comprehensive legal environment for businesses.

Foreign Company Setup: Foreign companies can establish a branch or wholly-owned subsidiary in mainland and free trade zones without appointing a UAE national sponsor. Setting up in a mainland zone allows direct access to the UAE market and flexibility in business across the Emirates, while free trade zones offer benefits like 100% foreign ownership, tax exemptions, and simplified customs procedures.

Business License Renewal: A UAE LLC must renew its business license annually to remain compliant and operational.

Restrictions on Activities: Different classified activities (e.g., trading and services) cannot be combined under one license to maintain clear business categorization.

Management and Incorporation:

• Companies must designate a manager via either the Memorandum of Association (MOA) or a separate management contract.
• Directors control daily operations; specific permits and licenses may be required depending on the business type (e.g., healthcare, medical equipment).
• Companies must establish an office within the same emirate as incorporation; operations in other free zones require additional licenses.

Disclosure of Beneficial Owners: All UAE companies must submit a declaration of Ultimate Beneficial Owners (UBOs), shareholders, and nominee directors.

Economic Substance Requirements (ESR):

• Companies engaged in relevant activities must file an ESR notification within six months of the financial year-end and submit an ESR report within 12 months. Non-compliance could lead to fines of up to AED 20,000.

Company Deregistration: The deregistration process takes a minimum of six months and requires a resident company secretary and a registered office during this period. The steps involved include notifying the relevant authorities, settling all outstanding liabilities, canceling visas, obtaining clearance from various government departments (e.g., immigration, labor), publishing a notice of deregistration, and submitting final audited financial statements. Compliance with legal requirements is essential throughout the process to avoid penalties or delays.

Membership in Global Organizations: The UAE is a member of various international organizations and treaties, including:

• World Intellectual Property Organization (WIPO)
• World Trade Organization (WTO)
• Paris Convention
• Patent Cooperation Treaty (PCT)
• WIPO Copyright Treaty
• WIPO Performances and Phonograms Treaty
• Rome Convention

Wages Protection System (WPS): Businesses in the UAE must register for the WPS, which typically takes four weeks. This system ensures timely and fair wage payments to employees.

End of Service Benefit: Expatriates are entitled to end-of-service benefits as part of their employment package, ensuring compensation after the completion of their service.

Job Loss Insurance: All employees must obtain job loss insurance, which costs AED 60 to AED 120 per year based on salary. This insurance provides financial assistance to employees who lose their jobs due to reasons other than gross negligence.

Emiratisation: Mainland employers with over 49 employees must employ a certain percentage of UAE nationals, increasing yearly by 2% until 2026. Non-compliance leads to fines of AED 6,000 monthly. The government offers support initiatives, such as wage subsidies and training programs, to assist businesses in meeting these requirements. Additionally, companies that comply with Emiratisation targets may receive priority in government contracts and reduced fees for various government services.

Number of skilled workers	Number of UAE nationals to be hired each year
0-49	Exempted
50 and above	One UAE nationals for every 50 skilled workers