The Real Purpose of UAE Corporate Tax Reform
The biggest shift in 2025 is the introduction of the Domestic Minimum Top-Up Tax (DMTT). This is a 15% tax that applies to large multinational enterprises (MNEs) with consolidated revenues of over €750 million. Even if the business operates in a tax-free zone, if the overall group’s effective tax rate in a jurisdiction is lower than 15%, the UAE will top it up to meet that rate. This is in line with OECD’s Pillar Two rules. If you are a UAE-based subsidiary or holding company of a global group, this is going to affect your structure, compliance, and possibly your location strategy.
Disclosure Obligations for Related Parties
Next is the updated disclosure regime. From 2025, businesses that deal with related parties (sister companies, group firms, or connected persons) will face more scrutiny. If your related party transactions exceed AED 40 million annually, or you provide more than AED 500,000 in benefits to connected persons (like directors or major shareholders), you're required to file detailed disclosure forms and possibly maintain transfer pricing documentation. This applies even if you are not a large corporation. Many SMEs operating under family structures or with multiple entities fall into this bracket without realizing it.
Unincorporated Partnerships: A New Tax Choice
Another notable change is that unincorporated partnerships, like joint ventures and professional firms, now have the option to elect for taxability under the FTA. This means they can be treated as separate taxable entities rather than passing income directly to partners. This will improve transparency, bankability, and tax planning for such structures.
New Participation Exemption Threshold
The participation exemption rule has also been refined. Now, if a UAE entity owns more than AED 4 million worth of shares in another company located in a jurisdiction that imposes at least a 9% corporate tax, the UAE entity can claim exemption on dividends or capital gains from that investment. This is important for family offices, investment holding companies, and international trade firms holding overseas shares.
Increasing Scrutiny on Free Zone Entities
There’s also increasing scrutiny from the Federal Tax Authority (FTA) on free zone companies, particularly those that rely on tax exemptions without maintaining actual substance. Simply renting a desk and claiming 0% tax is not going to hold. The FTA expects real activity, proper staffing, local spending, and clear segregation of mainland vs. free zone income. Businesses should review whether they meet the 0% eligibility criteria or risk non-compliance.
It’s Not Just About Tax Rates—It’s About Compliance Maturity
For companies registered in the UAE, 2025 is no longer about tax rates. It's about the maturity of compliance. If you're still managing accounts manually, operating with informal agreements, or transferring money between group companies without documentation, you're exposed.
Even businesses eligible for small business relief (under AED 3 million turnover) must remain cautious. Relief does not mean exemption from documentation, especially if they are part of a larger group or receiving foreign income.
How CSPZone Is Helping Businesses Prepare
At CSPZone, we are helping businesses structure correctly, comply confidently, and prepare early. We believe 2025 will separate compliant companies from exposed ones.
Frequently Asked Questions (FAQ)
Q1: Who is impacted by the 15% Domestic Minimum Top-Up Tax?
Large multinational groups with over €750 million in global revenue. Even if the UAE entity operates in a 0% free zone, it will be taxed if the group’s effective global tax rate is below 15%.
Q2: Are free zone companies safe from the new changes?
Only if they meet all conditions for 0% eligibility, including substance, segregation of income, and not dealing with the mainland. The FTA is actively auditing this now.
Q3: I own multiple companies with my relatives. Do related party rules apply?
Yes. Transactions between connected persons (family-owned entities or personal control) must be disclosed if thresholds are crossed. You may need transfer pricing documents.
Q4: Does Small Business Relief mean I don’t have to file anything?
No. You still must file returns, maintain records, and prove eligibility. Relief is conditional and not permanent.
Q5: Can CSPZone help with compliance setup and tax planning?
Absolutely. We assist with CT registration, documentation, related party analysis, and structuring advisory to ensure you’re compliant and protected before the 2025 changes take effect.
Q6: What should I do now to prepare for 2025?
Begin with a full corporate tax health check. Understand if you’re exposed, restructure if needed, and build internal controls around transactions and reporting.
If you’re serious about staying ahead of the UAE’s tax transition, talk to CSPZone. We’ll help you prepare not just for 2025—but for the next decade.
