The UAE introduced a federal corporate tax on 1 June 2023. If you're running a business in the UAE — whether mainland, free zone, or a branch of a foreign company — you need to understand how it works, what you owe, and when you need to file.
Here's the practical breakdown.
UAE Corporate Tax Rates
The corporate tax structure has three tiers:
0% on taxable income up to AED 375,000. This is a built-in exemption for small businesses. If your company's taxable profit is under AED 375,000 per year, you pay zero corporate tax. You still need to register and file a return — you just don't owe anything.
9% on taxable income above AED 375,000. This is the standard rate. It applies to the portion of your profit that exceeds the AED 375,000 threshold. So if your taxable income is AED 500,000, you pay 9% on AED 125,000 = AED 11,250.
15% for large multinationals. Companies that fall under the OECD's Pillar Two framework (global revenue of EUR 750 million or more) will be subject to a 15% minimum tax. This doesn't apply to most SMEs and startups operating in the UAE.
How Taxable Income Is Calculated
Taxable income = accounting profit (per IFRS or applicable accounting standards) adjusted for:
- Add-backs: Expenses not deductible for tax purposes (entertainment expenses above limits, fines and penalties, donations to non-qualifying entities)
- Deductions: Losses carried forward, qualifying interest payments
- Exempt income: Dividends from qualifying UAE companies, income from foreign branches (with election)
You don't pay tax on revenue — you pay tax on net profit after allowable deductions. This is an important distinction. A company with AED 2 million in revenue but only AED 300,000 in profit would owe zero corporate tax.
Who Needs to Register for Corporate Tax?
Every UAE business entity must register with the Federal Tax Authority (FTA), including:
- Mainland LLCs and sole establishments
- Free zone companies (even if they qualify for 0% rate)
- Branches of foreign companies operating in the UAE
- Partnerships and unincorporated joint ventures (if they carry on business)
Individuals are generally not subject to corporate tax unless they have a business or commercial license, or their combined annual business revenue exceeds AED 1 million.
Exempt entities (government entities, qualifying public benefit organizations, pension funds) still need to register but don't pay tax.
Registration Process
Registration is done through the EmaraTax portal (the FTA's online system). You'll need:
- Your trade license number
- Emirates ID of authorized signatory
- Memorandum of Association
- Financial statements (if available)
The FTA assigns you a Tax Registration Number (TRN) upon approval. Keep this number — you'll use it for all tax correspondence and filings.
Corporate Tax for Free Zone Companies
This is where it gets nuanced. Free zone companies can qualify for a 0% corporate tax rate on "qualifying income" — but not all income qualifies.
What Counts as Qualifying Income (0% Tax)
- Revenue from transactions with other free zone companies
- Revenue from services provided to entities outside the UAE
- Income from qualifying intellectual property
- Revenue from certain activities within the free zone (manufacturing, processing, trading in qualifying commodities)
What Counts as Non-Qualifying Income (9% Tax)
- Revenue from transactions with mainland UAE companies
- Revenue from providing services to mainland UAE customers
- Income from excluded activities (real estate, banking/insurance unless licensed in a free zone, related-party transactions that don't meet substance requirements)
Qualifying Free Zone Person Requirements
To get the 0% rate, your free zone company must be a "Qualifying Free Zone Person" (QFZP). The requirements are:
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Maintain adequate substance in the free zone. This means having employees, operating expenditures, and physical assets proportionate to your business activities. A shell company with no employees and no real operations won't qualify.
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Derive qualifying income. Your revenue must fall into the qualifying categories above.
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Have audited financial statements. QFZPs must prepare and maintain audited financial statements.
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Not elect to be subject to regular corporate tax. You have the option to opt out of the free zone regime and pay the standard 9% rate instead (some companies do this for simplicity if they have mixed income).
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Comply with transfer pricing rules. Transactions with related parties must be at arm's length, and you must maintain transfer pricing documentation.
The Mixed Income Problem
Many free zone companies earn both qualifying and non-qualifying income. For example, an IT consultancy in DMCC might serve clients in Saudi Arabia (qualifying) and clients on the Dubai mainland (non-qualifying).
In this case, the qualifying income is taxed at 0% and the non-qualifying income at 9%. You'll need to keep separate records for each income stream. If your non-qualifying revenue exceeds the de minimis threshold (the lower of AED 5 million or 5% of total revenue), you risk losing QFZP status entirely.
Small Business Relief
If your total revenue is AED 3 million or less in a tax period, you can elect for "Small Business Relief." This means:
- Your taxable income is treated as zero — no tax to pay
- You still need to register and file a return
- You don't need to maintain transfer pricing documentation
- Simplified record-keeping requirements apply
This relief is a significant benefit for startups and small companies in their early years. It applies regardless of your actual profit — even if your profit is above AED 375,000, as long as total revenue is under AED 3 million, you can elect for zero tax.
The relief is available until 31 December 2026 (as of the latest FTA guidance). After that, the threshold and availability may change.
Key Deadlines
Registration Deadline
The FTA has issued deadlines based on your license issuance date. Penalties for late registration start at AED 10,000. Check the FTA website or EmaraTax portal for your specific deadline based on your license issuance month.
Tax Return Filing Deadline
Your corporate tax return must be filed within 9 months from the end of your tax period. For most companies with a calendar year (January–December):
- Tax period: 1 January – 31 December 2025
- Filing deadline: 30 September 2026
Payment Deadline
Corporate tax payment is due at the same time as the return filing — within 9 months of the tax period end. Late payment penalties apply.
Penalties for Non-Compliance
| Violation | Penalty |
|---|---|
| Late tax registration | AED 10,000 |
| Late filing of tax return | AED 500/month (up to AED 10,000 max) |
| Late tax payment | 4% monthly on outstanding amount |
| Failure to maintain records | AED 10,000 (first offense), AED 20,000 (repeat) |
| Incorrect tax return | Percentage of underpaid tax |
These penalties are cumulative. Missing your registration, then filing late, then paying late can stack up quickly.
Transfer Pricing Rules
The UAE follows OECD Transfer Pricing Guidelines. If you have transactions with "Related Parties" or "Connected Persons," those transactions must be priced as if they were between independent parties (arm's length principle).
Who qualifies as a related party? Any entity where one party owns 50% or more of the other, or where both are controlled by the same person. This includes transactions between your UAE company and a parent company abroad, or between two companies you own in the UAE.
Documentation requirements: Companies must maintain a transfer pricing disclosure form (filed with the tax return) and, if revenue exceeds AED 200 million, a Master File and Local File.
This matters most for companies that invoice related parties — for example, if your UAE free zone company provides services to your holding company in another country. The pricing must reflect what an unrelated party would pay for the same service.
Practical Steps for Compliance
Step 1: Register with the FTA
If you haven't registered yet, do this immediately. Late registration carries a AED 10,000 penalty.
Go to tax.gov.ae → EmaraTax → Register for Corporate Tax. You'll need your trade license, Emirates ID, and company details.
Step 2: Set Up Proper Accounting
You need books and records that can produce financial statements compliant with IFRS (or IFRS for SMEs). At minimum, track:
- Revenue by source (qualifying vs non-qualifying for free zone companies)
- Expenses by category
- Asset register
- Payroll records
- Bank statements
Many businesses use cloud accounting software (Zoho Books, Xero, or QuickBooks) to maintain these records. Budget AED 1,000 – 5,000/year for software, or AED 5,000 – 15,000/year for a bookkeeper.
Step 3: Determine Your Tax Position
Before your filing deadline:
- Calculate your total revenue (are you eligible for Small Business Relief?)
- Calculate your taxable income (revenue minus allowable deductions)
- If free zone: classify income as qualifying vs non-qualifying
- Apply the appropriate tax rate
Step 4: File and Pay
File your return through EmaraTax within 9 months of your tax period end. The system will calculate your tax liability based on the information you provide. Pay any tax due by the same deadline.
Step 5: Maintain Records
Keep all financial records, supporting documents, invoices, contracts, and bank statements for 7 years after the relevant tax period. Digital records are acceptable.
Corporate Tax vs VAT: What's the Difference?
Both are taxes, but they work differently:
Corporate tax (9%) is on your company's profit — revenue minus expenses. You file once a year.
VAT (5%) is on the value of goods and services you sell. You collect it from customers and remit it to the FTA. You file quarterly.
You may need to pay both. A company with AED 2 million in revenue would collect 5% VAT on sales (passing it through to the FTA) and pay 9% corporate tax on any profit above AED 375,000.
VAT registration is mandatory when your taxable supplies exceed AED 375,000 per year. Voluntary registration is available at AED 187,500.
Common Questions
Do I need to file if my company had no revenue?
Yes. All registered companies must file a tax return, even if revenue is zero and no tax is owed. The return is your declaration that you had no taxable income.
Can I carry forward losses?
Yes. Tax losses can be carried forward and offset against future taxable income, up to 75% of the taxable income in any given period. Losses cannot be carried backward.
What if my free zone company serves both mainland and international clients?
You'll need to track qualifying and non-qualifying income separately. Qualifying income (international clients) is taxed at 0%. Non-qualifying income (mainland clients) is taxed at 9%. If non-qualifying revenue exceeds the de minimis threshold, you may lose QFZP status.
Do I need an auditor?
Free zone Qualifying Persons must have audited financial statements. Other businesses should check their free zone's requirements — many free zones require annual audits regardless of tax obligations. Mainland companies may need audits depending on their legal form and size.
How does corporate tax affect my personal income?
There is no personal income tax in the UAE. Corporate tax only applies to business profits. Salary paid to you as an employee of your own company is a deductible expense for the company (not taxable income for you personally).
Next Steps
If you're setting up a new business and wondering how corporate tax affects your structure decisions, the key question is whether your income will be primarily qualifying (international/free zone clients) or non-qualifying (mainland UAE clients). This determines whether the free zone 0% rate is viable for your business.
Use our AI assistant to ask specific questions about how corporate tax applies to your business activity, or check our comparison tool to find a free zone that suits your tax planning needs.
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