Dubai's Taxes In 2025
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At GenZone, we’ve helped set up over 500 companies in Dubai, working with a diverse range of businesses and entrepreneurs. As a company that thrives on providing transparent, clear, and simple guidance, one of the most common questions we get asked is about changes to the UAE’s tax systems. In particular, many clients have been wondering whether there have been significant updates in the UAE tax rules and tax systems, especially since the start of 2024. It’s something we’ve been getting a lot of questions about, so today I’m going to break everything down for you.
As someone who prides themselves on transparency, it’s important to clarify everything for our clients right from the start. We believe in explaining all the requirements upfront, breaking down all the costs, and being as transparent as possible. No surprises, no hidden fees. So, if you’ve been wondering if anything has changed with the tax situation in the UAE for small businesses and entrepreneurs, let’s dive in!
1. Taxation in the UAE: What’s Changed in 2025?
One of the main concerns when moving to a new country is understanding the tax situation. In the UAE, the tax environment is different from many other parts of the world, so let’s break it down and clear up any confusion.
No Major Changes – Business Relief Still Applies
Since 2024, the overall tax situation in the UAE remains relatively stable, especially for small and medium-sized businesses. This is important for anyone looking to set up their company without worrying about sudden changes or additional costs.
For businesses that generate less than 3 million AED (approximately $800,000 USD) in annual revenue, there’s still a significant tax relief in place. This means that small businesses don’t need to pay taxes on their corporate profits. That’s right—0% tax on both personal and corporate income for businesses under the threshold. If your business qualifies as a small business, you don’t need to stress about corporate taxes at all.
Pro Tip: If your business qualifies for small business relief, you can pay yourself a salary (a reasonable one, of course) and any remaining profits can be distributed as dividends, which are also tax-free. This is how many small business owners operate in the UAE, keeping their personal and company finances clean and compliant.
2. What Happens If You’re Not a Small Business?
If your business exceeds the 3 million AED threshold, you are considered a medium or large business under UAE regulations. This means that you will need to pay corporate tax on your profits, but don’t panic—it’s not as high as you might think.
How the Corporate Tax Works for Larger Businesses
If your business earns more than 3 million AED but less than 375,000 AED in net income, you’re still eligible for some tax relief. Here’s how the tax system works for businesses that are making more than this amount:
- The first 375,000 AED in net income is tax-free.
- Any income above that is taxed at 9%.
Let’s take an example: If your company makes 4 million AED in revenue and your net income is 500,000 AED, you only pay tax on the amount above the 375,000 AED threshold. That means:
- The first 375,000 AED is tax-free.
- You’ll pay 9% on the remaining 125,000 AED, which comes to 11,250 AED in tax.
That’s a very manageable tax burden compared to many other countries, where taxes are often higher, and the rules more complicated. So, even if you’re not a small business, the UAE’s tax system still offers significant benefits.
3. Compliance and Bookkeeping: What You Need to Know
Now, let’s talk about compliance—something that’s crucial when doing business in any country. While Dubai has long been known for its business-friendly environment, it’s no longer the “Wild West” when it comes to operations. The UAE government has recently cracked down on businesses that fail to comply with proper accounting and bookkeeping practices.
Here’s what you need to know:
Proper Accounting is a Must
If you’re starting a business in Dubai, you must ensure that your accounting and bookkeeping are up to par. This isn’t just a formality—it’s essential for staying compliant with the local laws. Whether you’re running a small e-commerce business or a larger corporation, maintaining accurate financial records is non-negotiable.
At GenZone, we work with highly skilled accountants, many of whom come from top firms like PwC (PricewaterhouseCoopers). We provide expert accounting services to help our clients manage their financial records properly. This includes preparing financial statements, handling VAT, and making sure everything is done correctly and legally.
VAT – When and How to Charge
In the UAE, VAT is applicable, but only under specific circumstances. Here’s a simple breakdown:
- If you’re running a free zone company or a mainland company and your business is selling products or services within the UAE, then you’ll need to charge VAT.
- If your clients are outside the UAE, you do not need to charge VAT, regardless of whether you’re in a free zone or on the mainland.
So, for example, if you’re running an e-commerce business and shipping products to customers outside the UAE, you do not need to charge VAT. But if you’re providing a service within the UAE (for example, recruitment services to clients in Dubai), VAT will apply.
VAT Registration: Do You Need It?
If your revenue exceeds 375,000 AED, you will be required to register for VAT, even if you’re not actively charging VAT to your clients. If your revenue is below this amount, you are not obligated to register for VAT or charge it. However, if your business does exceed this threshold, registering for VAT is mandatory, and you’ll need to ensure compliance.
4. Other Key Considerations for Business Owners in Dubai
Salaries and Dividends – What’s Reasonable?
When running your business, you might be wondering how much you can pay yourself. The UAE tax laws require that you pay yourself a reasonable salary based on the market standard for your role. So, if your business is making substantial profits, paying yourself an exorbitant salary could raise red flags. On the other hand, paying yourself too little may attract questions about the company’s profitability.
Net Zero or Null Report – Even For Inactive Companies
Even if your company isn’t making any revenue or has no significant activities (a net-zero company), you’re still required to maintain proper accounting records and file an annual null report. This is essential for staying compliant and avoiding penalties. Make sure you don’t skip this step, even if your business is not actively operating.
Why GenZone?
At GenZone, we pride ourselves on being the best service provider when it comes to helping individuals and businesses set up in Dubai. Our service is hands-on, personal, and designed to make your relocation as smooth as possible. Whether you’re setting up a mainland or free zone business, we ensure that every detail is taken care of— from the legal setup to the accounting.
We provide:
- Free consultation calls to discuss your options.
- A fast and efficient process, so you can focus on your business, not paperwork.
- A VVIP service, ensuring you get the premium experience every step of the way.
- Expert accounting services provided by top-tier professionals.
Our team of experts is here to guide you through the process, making sure everything is done properly, efficiently, and transparently. We’re with you every step of the way, and our clients rave about the quality of service we provide.
