Corporate tax applies to UAE businesses at a headline rate of 9% on taxable profits above AED 375,000. The rate is low by international standards, but the compliance obligations are not optional and apply to almost every licensed entity, including free zone companies and businesses that owe nothing.
This guide covers the rates and thresholds, who must register and when, how the free zone regime works in practice, small business relief, filing mechanics and the penalties for getting it wrong.
Rates and thresholds
| Taxable income | Rate |
|---|---|
| Up to AED 375,000 | 0% |
| Above AED 375,000 | 9% |
| Qualifying free zone income | 0% |
| Non-qualifying free zone income | 9% |
| Large multinationals in scope of Pillar Two | 15% top-up rules |
Who is subject to corporate tax
All UAE-incorporated companies, foreign entities effectively managed in the UAE, and individuals conducting business activity under a licence with turnover above AED 1 million per year are within scope. Employment income, personal investment income and personal real estate income are outside scope.
Extractive industries taxed at emirate level, government entities and qualifying public benefit entities are exempt, subject to conditions.
Registration is mandatory
Every taxable person must register with the Federal Tax Authority and obtain a corporate tax registration number, regardless of profit level. A company making a loss or earning less than the threshold still registers and still files.
Registration is completed through the EmaraTax portal using the trade licence, MOA, shareholder identification and authorised signatory documents. Late registration attracts an administrative penalty of AED 10,000.
The free zone regime
A Qualifying Free Zone Person pays 0% on qualifying income and 9% on everything else. Qualifying status requires adequate substance in the zone — real premises, staff and expenditure appropriate to the activity — audited financial statements, compliance with transfer pricing rules, and income falling within the qualifying categories.
Income from mainland customers is generally not qualifying, and exceeding the de minimis threshold for non-qualifying revenue causes the entity to lose qualifying status for the tax period and subsequent periods.
- Adequate substance in the free zone is mandatory, not nominal
- Audited financial statements are required to maintain qualifying status
- Transfer pricing documentation applies to related-party transactions
- Mainland-sourced income is generally taxed at 9%
Small business relief
Businesses with revenue at or below AED 3 million in the relevant and all previous tax periods may elect to be treated as having no taxable income for that period, subject to the relief remaining available under the Ministry's decisions.
The election still requires registration and the filing of a return; it simplifies the computation rather than removing the obligation.
Deductions and adjustments
- Business expenses incurred wholly and exclusively for the business are deductible
- Entertainment expenditure is restricted to 50%
- Interest deductibility is capped under the general interest limitation rule
- Fines, penalties and donations to non-approved bodies are not deductible
- Related-party transactions must meet the arm's length standard
Filing and payment
One corporate tax return is filed per tax period, due within nine months of the end of that period. Payment is due by the same date. There are no provisional or advance payment obligations for most businesses.
Accounting records must be maintained for seven years, and financial statements must generally follow IFRS, with IFRS for SMEs available to smaller businesses.
Penalties and how to avoid them
- Late registration: AED 10,000
- Late return filing: AED 500 per month for the first twelve months, rising thereafter
- Late payment: monthly percentage charge on unpaid tax
- Inaccurate records or returns: penalties based on the tax understated
- Prevention is bookkeeping: monthly reconciliation, clean related-party documentation and an early audit conversation
Frequently asked questions
What is the UAE corporate tax rate?
0% on taxable income up to AED 375,000 and 9% above it, with a 0% rate available on qualifying income of a Qualifying Free Zone Person.
Do all companies have to register for corporate tax?
Yes. Registration is mandatory for every taxable person, including free zone companies, loss-making businesses and those below the profit threshold.
Are free zone companies exempt from corporate tax?
No. They may achieve 0% on qualifying income if they meet substance, audit and transfer pricing conditions, but they must still register and file.
When is the corporate tax return due?
Within nine months of the end of the tax period, with payment due on the same date.
What is small business relief?
An election available to businesses with revenue at or below AED 3 million to be treated as having no taxable income for the period, subject to the applicable ministerial decisions.
What is the penalty for late corporate tax registration?
An administrative penalty of AED 10,000.
Is salary income taxed in the UAE?
No. Employment income, personal investments and personal real estate income are outside the scope of corporate tax.
Do I need audited accounts for corporate tax?
Audited statements are required for Qualifying Free Zone Persons and for certain revenue thresholds; all businesses must keep proper accounting records for seven years.