For decades, the UAE was famous for having zero tax. No income tax, no corporate tax — nothing. That changed on 1 June 2023 when the country introduced a federal corporate tax for the first time. If you run a business in the UAE, or you are thinking about starting one, this is one of the most important things you need to understand.
Do not worry — the rate is still one of the lowest in the world. But there are rules, thresholds, exemptions, and deadlines you need to know about. Let us break it all down in plain English.
What Is the UAE Corporate Tax Rate?
The headline rate is 9%. That applies to taxable profits above AED 375,000 per year. If your business makes less than that, the rate is 0%. So small businesses with modest profits effectively pay nothing.
There is also a higher rate of 15% that applies to large multinational enterprises with global revenues above EUR 750 million. This is linked to the OECD's global minimum tax framework (known as Pillar Two). For the vast majority of businesses in the UAE, though, the 9% rate is what matters.
To see exactly how much your business might owe, try our UAE corporate tax calculator. It gives you a quick estimate based on your expected profits.
Who Has to Pay?
Corporate tax applies to all businesses and commercial activities carried out in the UAE, including:
- Companies incorporated in the UAE (mainland and most free zone entities)
- Foreign companies that have a permanent establishment in the UAE
- Individuals conducting business activities with turnover above AED 1 million per year
That last point catches some people off guard. If you are a freelancer or sole trader earning above AED 1 million, you may need to register for corporate tax too. You can use our freelancer rate calculator to check what your annual earnings look like and whether you are likely to hit that threshold.
Who Is Exempt?
Not everyone pays. The following are generally exempt from UAE corporate tax:
- Government entities and government-controlled entities engaged in mandated activities
- Extractive businesses (oil and gas) — these are already taxed under separate emirate-level decrees
- Qualifying free zone persons — more on this below
- Qualifying public benefit entities such as charities
- Pension and social security funds
- Investment funds that meet certain conditions
Employment income — your salary — is also not subject to corporate tax. The UAE still has no personal income tax, so your wages remain tax-free.
Free Zone Businesses: The Qualifying Free Zone Person Rules
This is where it gets interesting. Free zone companies can benefit from a 0% corporate tax rate on qualifying income, but only if they meet specific conditions. The entity must:
- Maintain adequate substance in the UAE (real offices, real employees)
- Earn "qualifying income" — generally income from transactions with other free zone persons, or certain types of income from outside the UAE
- Not elect to be subject to the standard 9% rate
- Comply with transfer pricing rules and maintain proper documentation
If a free zone company earns income from mainland UAE customers, that income is typically taxed at the normal 9% rate. This is a really important distinction if you are deciding between a free zone and mainland setup. Our free zone vs mainland comparison tool helps you weigh up the differences, including the tax implications.
How to Register for Corporate Tax
All taxable persons must register with the Federal Tax Authority (FTA) and get a Tax Registration Number (TRN). Registration is done through the EmaraTax portal on the FTA website. You will need:
- Your trade licence
- Emirates ID of the authorised signatory
- Memorandum of association or partnership agreement
- Financial statements (if available)
The FTA has been rolling out registration in phases based on licence issue dates. If you have not registered yet, check the FTA website for the latest deadlines — penalties for late registration can be steep.
What Counts as Taxable Income?
Taxable income is essentially your accounting profit (as per International Financial Reporting Standards, or IFRS), adjusted for certain items. Common adjustments include:
- Disallowed expenses — fines, penalties, donations to non-qualifying entities, and entertainment expenses above certain limits
- Exempt income — dividends and capital gains from qualifying shareholdings, income from foreign permanent establishments (if you elect to exempt it)
- Related party transactions — these must be at arm's length, and you need transfer pricing documentation
Small businesses with revenue under AED 3 million can elect for "small business relief," which effectively means a 0% rate for that period. This relief is available for tax periods starting on or after 1 June 2023 and is expected to apply until 31 December 2026.
Filing Deadlines and Penalties
You must file a corporate tax return within 9 months of the end of your financial year. So if your financial year ends on 31 December 2025, your return is due by 30 September 2026.
Penalties include:
- AED 10,000 for late registration
- AED 500 per month (up to AED 10,000) for late filing
- Various penalties for incorrect returns, failure to keep records, and late payment
If you are also VAT-registered, you will already be familiar with the FTA portal. The corporate tax process works similarly. If you need help understanding your VAT obligations too, have a look at our UAE VAT calculator.
What About Groups of Companies?
The UAE corporate tax law allows for tax grouping. If a parent company owns 95% or more of a subsidiary (both UAE residents), they can form a tax group and file a single return. Transactions between group members are generally eliminated, which simplifies things and can reduce the overall tax burden.
There are also provisions for transferring losses within a group, and carrying forward losses for up to 75% of taxable income in future periods.
How Does UAE Corporate Tax Compare Globally?
At 9%, the UAE rate is one of the lowest in the world. For comparison, the UK charges 25%, Germany around 30%, Australia 25-30%, and the US federal rate is 21%. Even compared to other Gulf states, the UAE remains competitive — Saudi Arabia charges 20%, and Bahrain introduced a 15% rate for large multinationals.
Our business setup cost calculator can help you estimate the full cost of running a company in the UAE, including corporate tax, so you can compare it against other jurisdictions.
What Should You Do Now?
If you have not already, register for corporate tax on the EmaraTax portal. Make sure your bookkeeping is up to date and compliant with IFRS. If your business earns close to AED 375,000, run the numbers — you might qualify for the 0% bracket. And if you are in a free zone, check whether your income qualifies for the 0% rate or whether some of it will be taxed at 9%.
Corporate tax is here to stay, but at 9%, the UAE is still an incredibly tax-friendly place to do business. The key is making sure you are compliant and not leaving money on the table through poor planning.