UAE Issues New Tax Guidance: What It Means for Businesses in 2025
The United Arab Emirates (UAE) has traditionally maintained a tax-free environment for businesses. However, in recent years, the tax scenario has undergone significant fiscal transformation to align with global standards. The Federal Corporate Tax (CT) is now a reality in the UAE. In this scenario, the government is actively issuing new guidance to provide clarity and eliminate confusion. For businesses in the UAE, 2025 is a critical year for integrating these new regulations into their operations. This blog explores the UAE new tax guidance and unlocks how businesses can avoid double taxation.
Corporate Tax: A New Reality in the UAE Business World
The rollout of the Federal Corporate Tax has significantly transformed the business landscape. Moreover, full compliance is anticipated by 2025. The major features of CT are the following.
- Tax Rates – For businesses having income up to AED 375,000, only a 0% tax rate applies. This is to support startups and small businesses with heavy tax exemptions. On the other hand, income exceeding this threshold can be exempted with a 9% competitive tax.
- Free Zone Companies – For companies operating in free zones with a “qualifying income”, they are eligible for a 0% tax. However, the firm must comply fully with the qualifying criteria.
- Small Business Relief – For businesses having an income below AED 3 million, they can opt for Small Business Relief. Consequently, they will be relieved from tax payments and filing obligations until the end of 2026.
- Tax Top-Up for Multinational Enterprises – According to OECD’s Pillar Two criteria, large multinational enterprises with global revenue over €750 million are subject to a 15% Domestic Minimum Top-Up Tax (DMTT).
Note: Timely registration with the Federal Corporate Tax and filing annual tax returns are mandatory for all taxable persons. Thus, always beware that compliance is the key.
MAP Guidance for Enhanced Clarity
In an effort to clarify the MAP process, the Federal Tax Authority (FTA) has released new guidance on the Mutual Agreement Procedure (MAP). It is indeed a powerful mechanism that can help businesses resolve cross-border tax disputes. We discuss the detailed UAE new tax guidance below.
What is the Mutual Agreement Procedure (MAP)?
The Mutual Agreement Procedure (MAP) serves as a dispute resolution method that is included in the UAE’s network of Double Taxation Agreements (DTAs). MAP allows the UAE’s Ministry of Finance to work in coordination with international tax bodies. In other words, when businesses are taxed on the same income in two different countries, MAP allows the tax authorities in the UAE to intervene in the issue and resolve it accordingly. This process particularly helps firms to eliminate double taxation and address tax regulations that are not in accordance with the UAE’s DTA. Now that the UAE Corporate Law is in effect, MAP is an essential tool that helps businesses navigate the complex international tax regulations.
Key Takeaways for MAP Process: The Taxpayer version
- Firstly, if a taxpayer is subject to double taxation, they should thoroughly refer to the relevant DTA and verify the time period in which a MAP should be submitted.
- Secondly, check if you can use MAP along with any other legal steps within the country or if you have to choose one.
- Thirdly, conduct thorough research and gather all the facts and supporting documents that are relevant to your MAP claim. This will help the UAE’s competent authority to resolve your case effectively.
- Finally, reply to the UAE competent authority within one month and be honest in your communication.
MAP: A Proactive Approach for Guiding Businesses Ahead
Indeed, the UAE government’s new tax guidance extends beyond legislation. It actively supports businesses through:
Targeted guidance – The UAE’s new tax guidance helps SMEs and companies operating in the free zone significantly. The authorities have specifically developed some of the resources for these sectors.
Online resources – The FTA’s website is a comprehensive resource platform for businesses, serving as a hub of guides, FAQs, and clarifications.
Consistent education – The FTA conducts numerous workshops and webinars to educate the business community on the upcoming regulations and how they should be handled.
Final Thoughts
The UAE’s tax system is evolving into a globally aligned framework. The detailed guidance on procedures like MAP demonstrates a clear commitment to businesses in providing the support they need to navigate the complex world of cross-border taxation. While compliance requires effort, the long-term benefit is a stable and predictable business environment. Through the UAE new tax guidance, it is clear that the effort for compliance is two-sided. Moreover, by preparing diligently, businesses can confidently navigate the changes in 2025 and beyond.
The detailed guidance is available on the official MoF portal. Click here to know more about the UAE’s new tax guidance!
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