2025 Year in Review of FTA Decisions & Policy Changes
1: Mandatory Registration for Natural Persons
The Federal Tax Authority (FTA) has ruled out that natural persons conducting business activities with annual turnovers exceeding AED 1 million in 2024 are required to register for Corporate Tax by 31 March 2025 to avoid a penalty of AED 10,000. This applies to individuals operating as sole proprietors, freelancers, or any other unincorporated business activity. It is important to note that this requirement applies only to income derived from business or commercial activities and does not include employment income or passive income such as dividends or rental income.
2. Waiver of Penalty for Late Corporate Tax Registration
There has been an implementation of a Cabinet Decision to exempt certain corporate taxpayers from administrative penalties for late registration. It applies to corporate taxpayers who submit their registration applications within the specified deadline and aims to encourage voluntary compliance with tax legislation.
3. Introduction of Domestic Minimum Top-Up Tax (DMTT)
Starting 1 January 2025, the UAE implemented a 15% Domestic Minimum Top-Up Tax for multinational enterprise groups with global revenues of €750 million or more, in line with the OECD’s global minimum tax rules.
The DMTT ensures large MNEs pay at least a 15% effective tax rate in the UAE, reducing the risk of profits being taxed elsewhere.
4. Upcoming R&D Tax Incentives
Effective from 1st January 2026, businesses in the UAE will be able to claim tax credits of 30% to 50% on qualifying research and development (R&D) expenditures.
While the incentive will apply from 2026, companies are encouraged to begin planning in 2025 to align their R&D activities and documentation with the upcoming regime.
5. Tax Grouping Regulations
Ministerial Decision No. 301 of 2024, effective 10 December 2024, refines the definitions and requirements for forming tax groups, emphasizing continuous ownership and residency criteria.
6. Clarification on Corporate Tax Exemptions for REIT Investors
The FTA has issued further clarification on corporate tax exemptions for investors in Real Estate Investment Trusts (REITs) that qualify as investment funds. The update outlines the specific conditions under
Which REIT investors, both resident and non-resident, can benefit from exemption, particularly where REITs meet the criteria for Qualified Investment Fund (QIF) status.
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