OnlineCalculatorThe UAE corporate tax took effect on 1 June 2023 under Federal Decree-Law No. 47 of 2022, marking the country's first-ever federal tax on business profits. The standard rate is 9% on taxable income exceeding AED 375,000, while profits below that threshold are taxed at 0%. What many business owners miss is that even free zone companies must register with the Federal Tax Authority (FTA) — failing to do so triggers penalties regardless of whether any tax is owed. If you run a mainland LLC, a free zone entity, or freelance above AED 1 million in annual turnover, this guide breaks down exactly what you owe and when.
What Is UAE Corporate Tax?
UAE corporate tax is a direct tax on the net profit of businesses operating across all seven emirates. It replaced the country's long-standing zero-tax reputation for most industries. The law is governed by Federal Decree-Law No. 47 of 2022, later amended by Federal Decree-Law No. 60 of 2023.
The FTA administers, collects, and enforces the tax. Every juridical person incorporated under UAE law — including mainland LLCs, free zone entities, and branches of foreign companies — falls within scope. Natural persons (individuals) conducting business are also taxable once their annual turnover crosses AED 1 million in a Gregorian calendar year.
Certain entities are exempt by default. These include UAE government bodies, public pension funds, qualifying investment funds, and public benefit organisations. Businesses extracting natural resources remain under existing emirate-level taxation instead.
How UAE Corporate Tax Works
The tax applies to your accounting net profit, adjusted for allowable deductions and exemptions. Here is a practical example:
Scenario: A Dubai-based trading company earns AED 2,000,000 in annual revenue with AED 1,400,000 in deductible expenses. Its taxable income is AED 600,000.
- First AED 375,000 → taxed at 0% = AED 0
- Remaining AED 225,000 → taxed at 9% = AED 20,250
- Total corporate tax payable = AED 20,250
Rate Comparison Table
| Taxable Income Bracket | Tax Rate | Who It Applies To |
|---|---|---|
| AED 0 – AED 375,000 | 0% | All taxable businesses |
| Above AED 375,000 | 9% | Mainland and non-qualifying free zone businesses |
| Qualifying Free Zone Persons (on qualifying income) | 0% | Free zone companies meeting strict FTA conditions |
| Large MNEs (consolidated revenue ≥ EUR 750m) | 15% | Multinational enterprises under DMTT from Jan 2025 |
Expert insight: The AED 375,000 threshold is not a blanket deduction — it is a zero-rate band. You only pay 9% on the portion of income above that band. Many business owners mistakenly calculate 9% on total profits, overstating their liability.
UAE Corporate Tax — Key Facts and Figures
- Effective date: Financial years beginning on or after 1 June 2023
- Governing law: Federal Decree-Law No. 47 of 2022, amended by Federal Decree-Law No. 60 of 2023
- Administering body: Federal Tax Authority (FTA) via the EmaraTax portal
- Filing deadline: Within 9 months from the end of your financial year
- Withholding tax rate: Currently 0% (no categories specified yet by Cabinet Decision)
- Transfer pricing threshold: Local file and Master file required if standalone revenue exceeds AED 200 million or MNE Group revenue exceeds AED 3.15 billion
- Financial statements: Must follow IFRS; businesses earning under AED 50 million may use IFRS for SMEs
- Audit requirement: Mandatory for businesses with revenue exceeding AED 50 million per tax period
⚠️ NOTE: The Small Business Relief election is available for businesses with revenue of AED 3 million or less. Claiming this means your taxable income is treated as zero — but you must still register and file a return.
Key Factors to Consider
- Free zone status does not mean automatic exemption. Your entity must qualify as a Qualifying Free Zone Person (QFZP) under Ministerial Decision No. 265 of 2023. You must earn income only from qualifying activities, maintain adequate substance in the UAE, and avoid conducting excluded activities on the mainland.
- Registration is mandatory even at zero tax. The FTA requires all taxable persons to register for corporate tax and obtain a Tax Registration Number (TRN). Non-registration attracts administrative penalties under Cabinet Decision No. 75 of 2023.
- Record retention spans seven years. The FTA requires businesses to maintain all tax records, financial statements, and supporting documents for 7 years after the end of the relevant tax period. Digital records stored on approved systems are acceptable.
- Dividends and capital gains are generally exempt. Income from domestic and foreign shareholdings is typically excluded from taxable income, provided conditions are met. This avoids double taxation at both corporate and shareholder level.
- The DMTT changes the picture for large multinationals. Starting 1 January 2025, MNEs with consolidated global revenue of EUR 750 million or more are subject to a 15% Domestic Minimum Top-up Tax under OECD Pillar Two rules. This applies alongside — not instead of — the 9% rate.
Common Mistakes People Make
- Confusing revenue with taxable income. The AED 375,000 zero-rate band applies to net profit, not gross revenue. A company earning AED 5 million in revenue may have taxable income well below the threshold after deducting legitimate expenses. Always calculate from your adjusted accounting profit.
- Missing the filing deadline. Returns must be filed within 9 months of your financial year-end. For a business with a calendar year ending 31 December 2023, the deadline was 30 September 2024. ⚠️ WARNING: Late filing penalties start from the day after the deadline and compound quickly.
- Assuming free zone entities are fully exempt. Only companies that qualify as QFZPs and earn income from qualifying activities get the 0% rate. If your free zone company does any mainland business or conducts excluded activities, the standard 9% rate applies to all income — not just the disqualifying portion.
- Ignoring transfer pricing rules. Related-party transactions must follow the arm's length principle aligned with OECD guidelines. Even if your turnover is below the documentation threshold, the arm's length standard still applies. The FTA can disallow deductions for non-arm's length payments to connected persons.
- Not claiming Small Business Relief when eligible. If your revenue is AED 3 million or below, you may elect Small Business Relief, treating your taxable income as zero. Many small businesses are unaware this election exists and end up paying tax they could legally avoid.
Practical Tips
Register on EmaraTax early. Do not wait for FTA reminders. Visit eservices.tax.gov.ae, set up your account, and obtain your TRN well before your filing deadline. Last-minute registration creates unnecessary compliance risk.
Separate qualifying and non-qualifying income. If you operate in a free zone, maintain clear financial segregation between qualifying and excluded activities. Mixed income without proper documentation can disqualify your entire QFZP status.
Use IFRS for SMEs if you qualify. Businesses earning under AED 50 million can apply the simplified IFRS for SMEs standard. This reduces accounting complexity and audit costs significantly — especially relevant for startups and expat-owned small businesses.
Engage a licensed UAE tax advisor. Corporate tax is new in the UAE, and the FTA continues issuing guidance and ministerial decisions. A licensed advisor keeps you updated on rule changes and can identify deductions you might overlook. This is especially important for expat business owners unfamiliar with direct taxation.
Track deductible vs. non-deductible expenses. Entertainment costs, fines, and penalties are not deductible. Interest expenses are capped at 30% of EBITDA beyond a de minimis threshold. Maintain separate ledger codes for these categories from day one.
Plan for the DMTT if you are a large MNE subsidiary. If your parent company's global revenue exceeds EUR 750 million, start preparing for the 15% minimum tax rate effective from 2025. This requires separate calculations under GloBE Model Rules, not just UAE corporate tax provisions.