Introduction
The UAE’s business environment is entering a new era of heightened scrutiny and regulation. On one hand, sweeping tax reforms are reshaping corporate compliance, and on the other hand, ESG (Environmental, Social, Governance) reporting is no longer optional, it’s rapidly becoming a competitive necessity. For businesses, accountants, and valuation professionals, this is a moment of both challenge and opportunity.
In this blog post, we explore the latest changes in UAE tax law, the rising role of ESG in accounting and valuation, and practical steps your organization, or clients, should take to stay ahead.
1. Key Tax Reforms in UAE for 2025
a) Domestic Minimum Top-Up Tax (DMTT)
From 1 January 2025, the UAE will enforce a Domestic Minimum Top-Up Tax (DMTT) applicable to multinational enterprise groups. The objective: ensure that entities operating in the UAE pay at least a 15% effective tax rate, in line with OECD Pillar Two model rules.
This means that even if local incentives or deductions reduce an entity’s rate below 15%, a “top-up” tax will make up the difference.
b) Corporate Tax Compliance & Clarifications
- Businesses are expected to submit corporate tax returns within 9 months after the end of their tax period.
- The UAE’s Federal Tax Authority issued Public Clarification CTP007 to clarify rules around Aggregated Financial Statements (AFS) for tax groups.
- Audit, accounting, and transfer pricing adjustments are crucial for the 2025 filing cycle.
c) Free Zone Regime Updates
The UAE keeps refining its Free Zone Tax Regime. Eligible businesses may still access 0% corporate tax if they meet specific criteria and conditions.
d) Who Gets Affected?
- Large MNEs with consolidated revenues ≥ €750 million (in two of the past four years)
- Free zone entities that are part of a multinational group whose UAE ETR falls under 15%
- Mainland businesses and those earning profits above AED 375,000 (beyond small business thresholds)
2. The Rise of ESG & Sustainability Accounting in UAE
Tax is only part of the transformation. ESG is rapidly ascending in importance, especially in accounting, valuation, investor relations, essentially across the corporate value chain.
a) ESG Reporting: From Nice-to-Have to Must-Have
ESG disclosure is evolving from voluntary “green credentials” into a baseline expectation for credibility, access to capital, and competitive positioning.
The UAE’s Climate Law (Decree-Law No. 11 of 2024) sets a foundation for climate regulation across the public and private sectors.
While only Scopes 1 & 2 emissions reporting is required currently, Scope 3 is expected to move toward mandatory disclosure in future guidance.
Moreover, the launch of SustainInsight, an AI-powered ESG performance platform in the UAE, underscores how technology is accelerating real-time sustainability tracking.
b) Impact on Accounting & Audit Practices
- ESG metrics are now converging with financial metrics: carbon, waste, social impact, governance risk all influence valuations and credit assessments.
- Internal controls, data systems, and audit trails must evolve to integrate non-financial ESG data.
- CFOs and accountants are being asked to bridge the gap: embed ESG in financial reporting, budgeting, risk management, and valuation models.
c) Valuation & Investor Lens
From a valuation standpoint, companies with stronger ESG profiles may command higher multiples or lower risk discounts, since investors are increasingly pricing sustainability into their capital allocations.
In deals and due diligence, ESG risk (climate exposure, regulatory fines, reputational risk) is no longer a side issue, it’s central to valuation assumptions.
3. What Should Businesses & Advisors Do? (Action Plan)
Here are strategic steps that companies, accountants, and valuation professionals in the UAE should prioritize now:
| Area | Key Actions | Why It Matters |
|---|---|---|
| Tax Strategy & Compliance | Conduct a tax readiness assessment for DMTT; calculate hypothetical top-up liability | Prevent surprises and ensure alignment with OECD rules |
| Review free zone status and compliance with Free Zone rules | To preserve zero-tax benefits if eligible | |
| Ensure timely audit, TP documentation, and submission of financial statements | Failure can lead to penalties and reputational risk | |
| ESG & Reporting Infrastructure | Build or upgrade systems to collect ESG data (energy, emissions, social, governance) | To feed into reporting, valuation models, investor disclosure |
| Embed ESG metrics into budgeting, forecasting, and risk analysis | So ESG becomes part of core business decisions | |
| Conduct a materiality assessment — identify ESG themes most relevant to your sector | Avoid generic reporting; focus on what matters | |
| Engage third-party assurance or assurance readiness on ESG disclosures | Builds credibility with investors and stakeholders | |
| Valuation & M&A / Advisory Readiness | Include ESG risk adjustment factors in DCF / multiples | To be realistic in deal negotiations |
| Upskill finance teams (valuation, sustainability accounting, integrated reporting) | As ESG becomes core, capability matters | |
| Communication & Stakeholder Engagement | Create a transparent narrative: “How we are managing tax + ESG” | Investors, regulators, customers all care more |
| Monitor global ESG / tax trends & benchmark peers | Stay ahead, not reactive |
4. Why This Matters for Prabix
- Thought Leadership & Client Trust: By positioning yourselves as experts at the intersection of tax, accounting, valuation, and ESG, Prabix can become a go-to advisor in UAE’s new regulatory landscape.
- Cross-service Synergies: Prabix can offer integrated services (tax planning, ESG advisory, valuation) — which clients increasingly prefer over siloed consulting.
- Differentiation: Many firms are still reactive to tax change or dabble in ESG. A proactive, holistic approach will set Prabix apart.
Conclusion
The UAE in 2025 is not just updating tax laws, it’s redefining how value is measured, reported, and taxed. For businesses, advisors, and valuation professionals, the imperative is clear: adapt quickly, integrate ESG with finance, and build compliance into strategy, not just operations.
Prabix, by leaning in now, has the chance to lead this transformation in the UAE. If you like, I can create a series of blog posts under this theme (e.g. deep dive on DMTT, free zone structuring, ESG in valuations). Would you like me to map out that series?