Are RAK DAO Companies Subject to UAE Corporate Tax? Key Tax Insights for 2025
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The UAE has long been recognized for its business-friendly tax policies, attracting entrepreneurs and investors worldwide. However, with the introduction of UAE corporate tax, many companies operating in free zones—such as those in Ras Al Khaimah Digital Assets Oasis (RAK DAO)—are evaluating their tax obligations.
RAK DAO is a specialized free zone catering to blockchain, Web3, and digital asset businesses. Given its unique structure, an important question arises: Are RAK DAO companies subject to UAE corporate tax?
This blog explores the tax obligations, exemptions, and compliance requirements for RAK DAO businesses in 2025.
An Overview of UAE’s Corporate Tax Framework
The UAE introduced corporate tax regulations effective June 1, 2023, with a 9% tax rate on business profits exceeding AED 375,000. This move aligns the UAE with international tax standards while supporting its economic diversification strategy.
To encourage foreign investment, the UAE continues to offer special tax incentives for free zone businesses, including those in RAK DAO. However, these benefits come with conditions that businesses must meet to qualify.
Who is Subject to UAE Corporate Tax?
Businesses operating in the UAE fall into three main categories under the corporate tax framework:
- Mainland companies – Fully subject to the 9% corporate tax on all taxable income.
- Free zone companies (such as RAK DAO businesses) – May qualify for a 0% corporate tax rate on eligible income.
- Multinational enterprises (MNEs) – Subject to a 15% global minimum tax if they generate annual revenues exceeding €750 million.
While RAK DAO is a free zone, companies must meet strict criteria to maintain their 0% tax status.
Read Also: How to Obtain a Crypto License in IFZA
What is RAK DAO?
RAK DAO (Ras Al Khaimah Digital Assets Oasis) is a specialized free zone in Ras Al Khaimah designed for blockchain, Web3, and digital asset businesses. It offers a dynamic ecosystem for startups, investors, and global enterprises looking to innovate in the digital economy.
Key benefits of RAK DAO include:
- 100% foreign ownership
- No personal income tax
- No currency restrictions
- Fast and efficient company setup
These advantages make RAK DAO an attractive destination for businesses in emerging technology sectors.
Are RAK DAO Companies Taxable?
RAK DAO companies can benefit from a 0% corporate tax rate, provided they meet the following conditions:
- Generating qualifying income – Income from permitted free zone activities remains tax-free.
- Not conducting business with the UAE mainland – Transactions with mainland businesses may be subject to 9% corporate tax.
- Complying with free zone regulations – Companies must adhere to economic substance regulations (ESR) and other compliance requirements.
Failure to meet these conditions could result in tax liabilities and penalties.
When Do RAK DAO Companies Become Taxable?
Although RAK DAO companies enjoy significant tax advantages, certain activities may trigger corporate tax obligations.
1. Doing Business with UAE Mainland Entities
A RAK DAO company becomes subject to 9% corporate tax if it engages in commercial activities with the UAE mainland. However, some types of passive income—such as dividends, capital gains, and certain royalties—may still qualify for tax exemptions.
2. Non-Compliance with Free Zone Regulations
RAK DAO companies must adhere to the following:
- Economic Substance Regulations (ESR) to prove genuine business activities in the UAE.
- Transfer Pricing Rules to ensure fair financial transactions between related entities.
- Annual reporting and record-keeping requirements to maintain tax exemptions.
Non-compliance can lead to fines, loss of tax benefits, or additional tax obligations.
3. Earning Non-Qualifying Income
Not all business activities qualify for tax exemptions. If a RAK DAO company earns income outside the permitted scope, it may be taxed at the 9% corporate tax rate on profits exceeding AED 375,000.
Impact of Global Tax Reforms on RAK DAO Businesses
In 2025, the UAE implemented the OECD’s 15% global minimum tax for large multinational enterprises (MNEs) with annual revenues above €750 million.
While this change does not directly impact most RAK DAO businesses, companies engaged in cross-border operations should remain aware of evolving international tax obligations.
Ensuring Tax Compliance for RAK DAO Companies
To maximize tax benefits and maintain compliance, RAK DAO companies should:
- Register for corporate tax to avoid penalties.
- Structure business operations strategically to separate free zone and mainland transactions.
- Maintain proper financial records to comply with UAE regulatory standards.
- Seek professional tax guidance to ensure compliance with corporate tax and economic substance regulations.
Proper tax planning and adherence to regulatory requirements can help RAK DAO businesses retain their 0% corporate tax advantage while avoiding unnecessary liabilities.
Also Read: How Dubai’s Free Zones Attract UK Startups
Conclusion
RAK DAO companies can benefit from a 0% corporate tax rate, provided they meet qualifying income criteria and adhere to UAE free zone regulations. However, businesses engaging with the mainland or failing to comply with regulatory requirements may be subject to a 9% corporate tax on their earnings.
Navigating UAE corporate tax laws requires careful planning and expert guidance. SetupMate simplifies the process by offering tailored business setup and tax compliance solutions for RAK DAO companies. Whether you are launching a new venture or ensuring compliance, SetupMate provides end-to-end support to help your business thrive in the UAE.
Get expert assistance today at SetupMate and ensure your business remains tax-efficient and compliant.
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