Here’s our detailed tax compliance checklist, outlining the compliance requirements for Free Zone Entities, Mainland Companies, and Offshore Entities in the UAE for 2025. It covers key areas such as Corporate Income Tax (CIT), Value Added Tax (VAT), Economic Substance Regulations (ESR), and Transfer Pricing (TP). You’ll find information on essential deadlines, the necessary documentation, and direct links to official government resources, ensuring you’re up to date with the latest regulations.
This is our guide for businesses, helping you stay compliant with the UAE’s evolving tax and regulatory framework. It’s an invaluable tool for navigating the complexities of business operations within the UAE, whether you’re managing a Free Zone, Mainland, or Offshore entity.
Free Zone Entities
Corporate Income Tax (CIT)
Free Zone entities benefit from specific tax incentives, including a 0% tax rate on qualifying income. However, income not meeting specific criteria is taxed at 9%.
- Qualifying income: 0% CIT
- Non-qualifying income: 9%
Registration
All Free Zone entities must register for CIT through the Federal Tax Authority (FTA) e-Services portal within 3 months of incorporation or upon meeting the threshold criteria. Late registration attracts a penalty of USD 2,772 (AED 10,000).
Filing & Payment
Entities must file annual CIT returns within 9 months after fiscal year-end. Even entities with zero tax payable must submit NIL returns to remain compliant.
Documentation
Entities must maintain accurate financial records and retain them for at least 7 years. Additionally, annual audited financial statements are mandatory.
Penalties
Penalties include USD 136/ month (AED 500/month) for the first 12 months of late filing and USD 272 (AED 1,000/month) thereafter. Failing to maintain adequate records may result in fines between USD 2,772-5,445 (AED 10,000–20,000).
VAT Compliance
Free Zone entities must comply with VAT regulations, which involves charging, collecting, and remitting VAT at the standard rate of 5%.
- Registration Threshold: USD 102,000 (AED 375,000) annual turnover. Immediate registration is required upon crossing this threshold.
- Registration: Through FTA e-Services.
Filing & Payment
Monthly or quarterly returns are due by the 28th day of the month following the end of the tax period.
Documentation
Maintain comprehensive VAT records for at least 5 years.
Penalties
Late filings incur USD 272 (AED 1,000) initially, and USD 544 (AED 2,000) subsequently. Late payment penalties escalate up to 300% of the unpaid VAT amount.
Economic Substance Regulations (ESR)
The UAE has abolished separate ESR filings from FY 2023, integrating substance requirements into the broader CIT compliance framework. Entities must maintain clear documentation of their economic activities to align with CIT regulations.
Transfer Pricing (TP)
Free Zone entities must comply with UAE transfer pricing rules by documenting intercompany transactions clearly and maintaining transparency in pricing practices.
- Documentation: Required for entities with revenue exceeding USD 54,451,402 (AED 200 million) or related-party transactions exceeding USD 10,890,280 (AED 40 million) annually.
- Penalties: Non-compliance can result in income adjustments and loss of beneficial tax rates.
Mainland Companies
Corporate Income Tax (CIT)
Mainland entities are subject to federal CIT, with a progressive rate structure:
- 0%: On profits up to USD 102,000 (AED 375,000)
- 9%: On profits exceeding USD 102,000 (AED 375,000)
Registration
Entities must register for CIT within 3 months of incorporation or upon meeting the revenue threshold. Registration is managed via FTA e-Services. Late registration penalties are 2,722 (AED 10,000).
Filing & Payment
Returns must be filed within 9 months after fiscal year-end, accompanied by payment of any tax due.
Documentation
Entities must retain comprehensive financial records for at least 7 years.
Penalties
Late filings are penalised at USD 136-272 (AED 500–1,000 per month). Failure to maintain required records may incur fines of USD 2,722-5,445 (AED 10,000–20,000).
VAT Compliance
All Mainland entities must comply with VAT, applying a standard rate of 5% on applicable transactions.
- Registration Threshold: USD 102,000 (AED 375,000) turnover annually. Immediate registration required upon reaching this threshold.
Filing & Payment
VAT returns must be filed monthly or quarterly, by the 28th of the subsequent month.
Documentation
Maintain VAT records for a minimum of 5 years.
Penalties
Strict penalties apply for late compliance, with fines escalating significantly for repeated offenses.
Economic Substance Regulations (ESR)
No ESR filings are required post-2022; however, entities must still demonstrate economic substance through their operational practices to comply with CIT requirements.
Transfer Pricing (TP)
Mainland entities must document intercompany pricing and demonstrate that transactions with related parties are conducted at arm’s length.
- Documentation: Mandatory for entities with annual revenues above USD 54,451,402 (AED 200 million or significant related-party transactions exceeding USD 10,890,280 (AED 40 million).
- Action Points: Consult the FTA Transfer Pricing Guide for detailed guidance.
Offshore Entities
Corporate Income Tax (CIT)
Offshore entities, including those registered in special jurisdictions like RAK ICC, must comply with the UAE’s 9% corporate tax on worldwide income unless specific exemptions apply.
Registration
Registration via FTA e-Services is mandatory within 3 months from incorporation or meeting revenue thresholds. Late registration penalties apply.
Filing & Payment
Annual CIT returns are mandatory even for entities claiming exemptions or those without taxable income.
Documentation
Entities must retain financial and management records for a minimum of 7 years.
VAT Compliance
Only applicable if the offshore entity engages in taxable activities within the UAE. Immediate registration is required upon initiating taxable supplies.
Penalties
Non-compliance with VAT regulations carries standard penalties under FTA guidelines.
Economic Substance Regulations (ESR)
ESR filings are no longer required post-2022; however, entities should maintain documentation of operational substance for CIT and international compliance purposes.
Transfer Pricing (TP)
Offshore entities must document related-party transactions and ensure pricing aligns with market standards.
- Documentation: Required for large or significant transactions as defined by FTA guidelines.
Key Compliance Deadlines (2025)
- CIT Registration: Within 3 months from incorporation or revenue threshold.
- CIT Return Filing: 9 months after fiscal year-end.
- VAT Registration: Immediately upon crossing USD 102,000 (AED 375,000) turnover.
- VAT Return Filing: Monthly or quarterly, by the 28th following the end of each tax period.
Expert Assistance for Your Tax Compliance
The UAE’s new tax landscape can be complex to navigate independently. Virtuzone offers expert corporate tax services to ensure your business remains fully compliant with all regulatory requirements.
Contact Virtuzone today to secure peace of mind and dedicated tax support for your UAE operations.
