Corporate Tax Strategy: Corporate Tax Plan for UAE Businesses in 2025

For years, the UAE was known as a low-tax, business-friendly jurisdiction where tax planning was often an afterthought. That is no longer the case. With the introduction of Federal Decree-Law No. 47 of 2022 on the Taxation of Corporations and Businesses, corporate tax is now a central part of every serious business decision, directly impacting a company's overall tax liability and its tax bill.

A well-designed corporate tax strategy is no longer just about reducing tax payments; it is about aligning your business structure, operations, financing, and reporting with a new regime that directly affects profits, cash flow, governance, and long-term growth. Businesses that treat corporate taxation as a simple compliance exercise risk facing unnecessary tax leaks, penalties, or structural limitations. Those that treat it strategically will protect value and gain an advantage in the new tax landscape.

This guide explains how the new tax system works, what entities and attributes you must understand, and how to convert them into a robust and practical tax optimization strategy.

 The UAE Corporate Tax Regime: The Starting Point of Strategy

 Legal Basis and Scope

The foundation of business tax in the UAE is Federal Decree-Law No. 47 of 2022. This law, along with subsequent Cabinet and Ministerial Decisions, establishes the overall framework:

• It defines who is a taxable person (resident and non-resident, juridical persons, and certain individuals).

• It sets out tax rates, thresholds, and exemptions, which are crucial for assessing the tax burden.

• It introduces special regimes such as the Qualifying Free Zone Person (QFZP).

Your corporate tax strategy must always start from this legal anchor, ensuring compliance with tax laws and regulations.

Rates, Thresholds, and Reliefs

Understanding the rate structure is the first step to reduce your tax strategically.

Taxable Income (AED) :

Up to 375,000               :    0%

Above 375,000             :    9%

While the corporate tax rate of 9% is the standard, effective corporate tax planning relies on understanding other attributes:

• 0% for QFZPs: On qualifying income, subject to strict substance conditions. This offers a favorable tax environment.

• Small Business Relief: A defined revenue threshold offers relief for limited tax years.

• Exempt Incomes: Including qualifying dividends and capital gains from qualifying participations.

• No Withholding Tax: On many typical outbound payments, making the UAE attractive for cross-border structuring and reducing tax liabilities.

A sophisticated strategy does not blindly "chase 0%," but evaluates when and how these features apply to achieve significant tax savings.

Policy Objectives You Should Respect

The regime is designed to align with international tax regulations and BEPS standards. Therefore, your strategic approach must be substance-driven, transparent, and defensible. Artificial structures used purely to minimize a company’s tax liability without commercial logic are increasingly risky in the current tax landscape.

Corporate tax planning strategies

A core element of sound financial management in the UAE is the proactive implementation of effective tax planning. Given the introduction of the corporate tax rate of 9% on taxable income above the threshold, businesses must move beyond simple compliance to adopt the best corporate tax practices. While historical global examples like the US Tax Cuts and Jobs Act demonstrate the profound impact of legislative changes, in the UAE, successful navigation depends on bespoke solutions. Ultimately, tax planning strategies can help you reduce your overall tax liability by legally optimizing your structure and operations. These strategies can help you reduce your exposure to the standard rate and help you reduce your tax burden by leveraging available reliefs, exemptions, and special regimes like the Qualifying Free Zone Person (QFZP) status.

 Tax Authorities and Legal Actors in Your Strategy

Every entity with an income tax exposure needs a clear plan.

Mainland Companies

Onshore companies (e.g., LLCs) are generally resident taxable persons taxed on worldwide income. For them, corporate tax planning helps in key areas:

• Group Structure: Assessing the possibility of forming a tax group for operational efficiency.

• Financing: Managing deductibility of interest and other expenses to maximize the tax deduction.

• Exemptions: Utilizing participation exemptions for foreign income.

Free Zone Companies and QFZP Status

Free zone entities are a core component of the UAE’s tax system. Achieving QFZP status is a key focus for businesses seeking a lower tax burden on qualifying income. This requires:

• Defining qualifying income activities precisely.

• Ensuring adequate economic substance (people, premises).

• Segregating activities to avoid contamination, as a breach can impact the company’s overall tax position.

 Foreign Entities

Non-resident companies with a Permanent Establishment (PE) in the UAE or with UAE-source income are also within the scope. Their strategy centers on defining PE existence and the profits attributable to it, coordinating positions with foreign authorities to manage potential double tax obligation.

 Taxable Persons and Business Types: Who Needs a Corporate Tax Strategy?

Mainland companies

Onshore companies (e.g., LLCs, PJSCs and other juridical entities incorporated under UAE law) are resident taxable persons. They are generally taxed on worldwide income, with specific rules for foreign branches, permanent establishments, and double tax treaties.

For mainland businesses, corporate tax strategy focuses heavily on:

• Group structure and possible tax grouping.

• How foreign branches and cross-border operations are managed.

• Financing structures and the deductibility of interest.

• Use of exemptions for participations and foreign income.

Free zone companies and QFZP status

Free zone entities are a core component of many UAE businesses. These can become Qualifying Free Zone Persons (QFZPs) if they meet defined conditions, giving access to 0% tax on qualifying income and 9% on non-qualifying income.

A corporate tax strategy involving free zones focuses on:

• Identifying which activities could constitute qualifying income.

• Ensuring adequate economic substance (premises, people, decision-making, expenditure) in the free zone.

• Segregating qualifying and non-qualifying activities to avoid contamination of the entire entity’s status.

• Monitoring thresholds and conditions on an ongoing basis, not only at year-end.

Individuals with business income

Certain individuals (natural persons) engaged in business or professional activities above a revenue threshold are also subject to corporate tax. They need strategy just as much as companies:

• Should their activities be incorporated into a company structure?

• How should they treat expense deductions, capital assets, and mixed-use items?

• Do they have exposure to permanent establishments or foreign-source income?

Foreign entities with a Permanent Establishment (PE)

Non-resident companies with a Permanent Establishment in the UAE or with UAE-source income fall under the regime as well. For them, corporate tax strategy is about:

• Determining whether a PE exists.

• Defining which profits are attributable to that PE.

• Coordinating positions with foreign tax authorities and double tax treaties.

Corporate Tax Planning vs Corporate Tax Strategy

Planning: The Tactical Layer

Tax planning often refers to tactical steps: claiming a tax credit, choosing a method for a transaction, or timing an expense to reduce your tax bill this tax year. This is essential, but it is short-term.

Strategy: The Structural, Long-Term Layer

Strategic tax planning is structural and long-term. It answers core questions about the business structure:

• How should our legal structure evolve over the next three to five years?

• How do we align our operating model with the tax rules?

• How do we design transfer pricing policies that are defensible, avoiding issues with potential gains tax?

• How do we ensure our systems produce tax-ready data for the next tax year?

Effective strategies are about having a coherent roadmap that integrates tax incentives and reliefs.

Core Steps in Building a Corporate Tax Strategy

• Step 1 – Diagnose Your Current Tax Profile

A strategy begins with a diagnostic review by your tax advisor or tax professional:

• Identify all entities and income streams.

• Review existing contracts and financing.

• Check current registration and record-keeping quality.

This step uncovers inconsistencies, ensuring you are aware of your current tax liabilities.

Step 2 – Evaluate Models: Mainland vs. Free Zone vs. Hybrid

This critical step determines how you will achieve maximum tax efficiency:

• Should customer-facing activities be onshore or in a Free Zone?

• Is a hybrid model (mixing Mainland and Free Zone) optimal?

The chosen model must balance access to the 0% rate with substance requirements and commercial realities. This is foundational for all strategies for corporate tax planning.

 Step 3 – Design Transfer Pricing and Related-Party Policies

The arm’s length principle applies to all transactions between related parties. A strategy must:

• Identify all intra-group transactions (loans, services, IP licenses).

• Design pricing methodologies that reflect economic reality and ensure compliance with tax rules.

A coherent transfer pricing strategy avoids double taxation, adjustments, and disputes, helping a company to lower your tax risk.

Step 4 – Build a Record-Keeping and Reporting Framework

Reliable data is the backbone of compliance. You need to:

• Align your accounting system to separate related-party income and qualifying vs. non-qualifying income.

• Ensure that contracts and intercompany agreements support your story for the FTA.

• Put in place document retention policies to support your tax obligation for the required years.

 how to integrate audit findings into your tax filings.

Strategic Use of Key Corporate Tax Attributes

Leveraging Exempt Income and Participations

The law provides for participation exemptions for dividends and capital gains from qualifying shareholdings. A forward-looking strategy will:

• Design a clear holding company structure to take advantage of these rules.

• Plan acquisitions and disposals to preserve favorable tax treatment, managing the future tax outlook.

QFZP and Free Zone Strategy

The QFZP regime is an ongoing management exercise, not a one-time decision. Strategy must include:

• Precise definitions of qualifying income.

• Robust substance plans (staffing, premises).

• An internal compliance checklist to monitor the de-minimis thresholds annually.

Loss Management and Restructuring Relief

Strategic planning ensures you properly record and track tax losses for carry-forward to offset next tax profits, and make use of restructuring reliefs to avoid triggering a taxable event during group reorganisation.

Challenges and Risks in Corporate Tax Strategy

Despite the simple rate structure, implementing a strategy is complex.

• Evolving Guidance: Cabinet and Ministerial Decisions mean the rules are constantly refined. Staying compliant with tax laws requires a dynamic approach.

• QFZP Complexity: One misclassification of revenue or a breach of substance can jeopardize QFZP status for multiple years.

• Cross-Border Complexity: Ensuring that prices are supported and documented, especially for groups with foreign operations, is key to managing the total tax implications.

Technology, Governance, and Culture in Corporate Tax Strategy

Technology as an enabler

Modern corporate tax strategy does not exist in isolation from your systems. Good practice includes:

• Embedding tax codes and logic in your ERP system.

• Automating allocation keys for shared costs between entities or businesses.

• Creating dashboards that show effective tax rate, tax provision, and key risk indicators to management.

This reduces manual errors and frees up your finance team to focus on interpretation and planning rather than basic data gathering.

Governance and internal roles

Clear governance around tax is essential:

• Define who is responsible for tax strategy, day-to-day compliance, and management sign-off.

• Outline when board or shareholder approval is required for structural changes that affect tax.

• Establish periodic tax risk reviews and health checks.

This governance framework ensures that corporate tax strategy is not a one-off document but a living part of your management processes.

Culture and awareness

Finally, the culture of your organisation matters:

• Commercial teams should understand that contract terms, pricing, and location of activities can have tax consequences.

• Finance and tax should be involved early in major deals, expansions, or restructurings, not after the fact.

• Management should treat tax as a strategic cost to be actively managed, not just a compliance chore.

How Young & Right Can Help You With Corporate Tax Strategy

Building an effective corporate tax strategy in the UAE requires more than understanding the corporate tax rate of 9%—it requires foresight, structured planning, and a deep understanding of the evolving tax legislation. At Young & Right, we specialise in helping businesses design and implement corporate tax planning strategies that are compliant, future-ready, and tailored to the UAE’s regulatory landscape.

Our team evaluates your operations, financial structure, and long-term goals to create tax planning strategies that maximise efficiency while ensuring full tax compliance. We analyse every component of the corporate tax system, helping you understand how different tax categories—from payroll tax to allowable deductions—may impact your tax position.

A strong corporate tax strategy is not limited to filing your tax return. It includes forward-looking approaches such as identifying available tax reliefs, leveraging R&D tax opportunities, and applying strategies such as deferring income where appropriate. These strategies can help stabilise cash flow, enhance profitability, and ensure that you only pay how much tax is legally required.

The UAE tax landscape can be challenging, especially as your organisation grows and financial structures become more complex. We support you with targeted tax planning in the UAE designed to minimise liabilities and reduce your tax burden at the end of the tax year, without compromising compliance. Whether your goal is to benefit from tax relief, optimise expenses, or prepare for corporate expansion, Young & Right helps you make well-informed decisions rooted in sound tax management principles.

Conclusion: Corporate Tax Strategy as a Business Asset

Corporate income tax in the UAE is a new reality. Businesses that engage in effective corporate tax planning and implement strategic tax planning will gain a significant advantage. A good tax professional can help you by:

• Paying no more tax you owe than legally required.

• Increasing predictability of profits and cash flows.

• Being better prepared for audits and changes in tax laws.

Ultimately, a robust corporate tax strategy will help a company reduce their tax burden, protect value, and secure long-term, sustainable growth in the UAE.