Top Strategies for Effective Tax Planning in the UAE

Tax planning is more than just “paying less tax.” It’s about structuring your affairs legally, proactively, and efficiently to align with your financial goals. Whether you’re a business or an individual investor, doing this well can boost your returns, reduce risk, and ensure long-term sustainability. In the UAE, where tax laws have evolved rapidly, strategic planning is no longer optional.

Fortunately, tax consultancy firms like Oblique Consult provide excellent services to their clients and assist them in navigating the changing landscape, tailoring strategies to their needs, and staying compliant while unlocking tax advantages.

Key Updates of the Evolving UAE Tax Landscape for 2025

Understanding current rules is the foundation for planning. Here’s a quick snapshot of the UAE’s tax system and recent changes:

Corporate Tax Regime & New Minimum Top-Up Tax

• From financial years beginning June 1, 2023, the UAE introduced a federal corporate tax.
• The rate is 0% on taxable income up to AED 375,000, and 9% on profits above that threshold.
• Starting January 1, 2025, a Domestic Minimum Top-Up Tax (DMTT) of 15% applies to large multinational enterprises (MNEs) whose consolidated global revenue exceeds €750 million, aligning the UAE with OECD Pillar Two rules.
• Cabinet Decisions No. 34 and 35 of 2025 introduce changes affecting investment funds, limited partnerships, and nexus rules for nonresidents.
• The new rules in 2025 around interest deductibility, audit requirements, and nexus clarifications must be monitored.

VAT & Excise Taxes

• VAT was introduced in 2018 at a standard rate of 5%.
• Excise taxes continue to apply on products harmful to health/environment (e.g., tobacco, energy drinks, sugary carbonated drinks) under rates that may vary by product.

Individual Tax Treatment

• The UAE still imposes no personal income tax.
• However, individuals conducting business in the UAE must consider corporate tax registration if turnover exceeds AED 1 million in a calendar year.

Smart Tax Planning Strategies for Businesses

Here are practical tactics Oblique Consult recommends to clients looking to optimize tax outcomes in the UAE:

1. Choose the Right Location: Free Zones & Qualifying Entities

Free Zones remain attractive, but only if structured properly. A “Qualifying Free Zone Person” (QFZP) can retain a 0% tax rate on qualifying income, provided substance, activity, and documentation requirements are met. But beware: under the DMTT regime, a Free Zone company that’s part of a larger MNE group might lose that benefit.

2. Document Transfer Pricing & Substance

With cross-border operations, it is vital to maintain arm’s-length pricing, transfer pricing studies, and robust substance. Tax authorities are increasingly scrutinizing related-party transactions as part of BEPS and Pillar Two enforcement.

3. Use Profit Shifting Carefully

While shifting profits to low-tax jurisdictions is tempting, UAE rules and international regimes demand care. Base erosion techniques must be defensible; aggressive maneuvers may trigger audits or top-up tax.

4. Interest & Expense Deductions

The UAE’s tax rules now include limitations on interest deduction (general and specific rules) and stricter criteria for deductibility.

Plan debt structuring to stay within thresholds and document arm’s-length terms.

5. Optimize Capital Allowances & Asset Rules

If your business owns real estate or capital assets, keep abreast of recent Ministerial Decision No. 173 of 2025, which introduced specific tax treatments for property and related transactions.

6. Leverage Double Taxation Agreements (DTAs) & Residency Certificates

The UAE has numerous DTAs, which can reduce or eliminate withholding taxes and double taxation for inbound or outbound income. Obtaining a tax residency certificate can unlock those treaty benefits.

7. Proactive Audit Preparedness

Set up internal reviews and mock audits to ensure documentation, compliance, and defenses are ready. Should disputes arise, engage professional advisors early to navigate resolution avenues.

Tax Planning Tips for Individuals & Investors

Even without personal income tax, individuals in the UAE should consider:

• Business Turnover Thresholds: If your turnover from business or freelancing exceeds AED 1 million, corporate tax obligations may apply.
• Wealth & Succession Planning: Although the UAE has historically been favorable in estate transfer, international jurisdictions where you hold assets may tax inheritances. Cross-border structuring is key.
• Tax-Efficient Investments: Real estate, qualifying funds, and other instruments can be structured to maximize net returns. Be aware of recent revisions in fund structures under Cabinet Decision 34.
• Residence & Home-Country Taxes: Your home country may impose tax on global income; check whether UAE residency or DTAs can reduce that burden.

Frequently Asked Questions (FAQs)

Q: How does the 15% top-up tax apply?

A: It applies to large multinationals meeting certain revenue thresholds (≥ €750 million globally) from January 1, 2025, ensuring effective tax is at least 15% via DMTT.

Q: Do individuals in the UAE pay personal income tax?

A: No system of personal income tax currently exists.

Q: Can Free Zone companies really have 0% tax?

A: Yes, if they qualify under QFZP rules, meet substance tests, and their income is “qualifying.” But global top-up rules could apply for MNE groups.

Q: When do I need to register for corporate tax as an individual/business?

A: If you run a business and your turnover exceeds AED 1 million, you must register by March 31st following that year to avoid penalties.