UAE Corporate Tax Compliance & Advisory

From June 1, 2023, a new corporate tax came into effect in the United Arab Emirates, affecting almost all business persons in the country. The Emirates are gradually moving away from a tax-free environment and are striving to maintain tax transparency in business, comply with international financial standards, and combat illegal activities and tax evasion. This is important as the country positions itself as a global financial and trading center and is actively implementing advanced tax and accounting practices. In 2024, the UAE achieved significant results in this regard, leading to its removal from the FATF "gray" list. This indicates a positive trend, suggesting that authorities will likely continue to develop and enhance their tax system.

All legal and natural persons conducting business in the UAE are required to register for corporate tax purposes with the tax authority, obtain a taxpayer registration number, and annually file a tax return. This must be done in 2024. Failure to register on time will result in a penalty of 10,000 dirhams. Each of these stages — corporate tax registration, preparation and filing of the tax return, and tax payment—is a multi-step process where it is essential to comply with the requirements and key deadlines, as well as to have a clear understanding of the potential consequences for any violations. An experienced tax consultant can help you navigate the complexities of corporate tax in detail.

Key definitions of the UAE federal corporate tax law

Rates

The UAE offers a competitive corporate tax rate of 9%, positioning it among the lowest globally. Special conditions allow reductions to 0% for companies in qualifying free zones and for small businesses with annual revenues below certain thresholds. These reductions aim to encourage specific economic activities and support small enterprises.

Tax base

Corporate tax applies to a company's taxable income, defined as net profits or losses adjusted by specific items under UAE tax regulations. The law is federal, making it applicable across all Emirates and ensuring consistency in tax practices.

Taxable income

Taxable income encompasses all business revenue after deducting allowable expenses, following UAE corporate tax rules. Entities may adjust net profits for qualifying deductions, including certain losses carried forward, and for other incentives where applicable.

Taxable persons

Both juridical persons (such as companies) and natural persons (like individual entrepreneurs conducting business under a license) fall under the scope of corporate tax. Foreign persons with a UAE permanent establishment or income from UAE sources are also liable, depending on the origin of the income and the activity type.

Exemptions

Exempt entities include government bodies, investment funds, pension funds, and companies involved in natural resource exploration. Moreover, certain types of income, like dividends and real estate gains, may not be subject to corporate tax.

EmaraTax

Corporate tax registration, return filing and payment are managed through the Federal Tax Authority’s EmaraTax platform. In most cases, taxpayers must file their annual corporate tax return and settle any tax due within nine months after the end of their relevant tax period. Companies and taxable individuals are required to maintain proper accounting records and supporting documentation for at least the minimum period prescribed by law, so that they can substantiate their tax position in the event of an audit or review by the authorities.
 

Who is subject to the corporate tax in the UAE?

For corporate tax purposes, taxable persons can include both residents and non-residents. This classification is separate from UAE residency status, visa status of company owners, or their physical presence in the country.

Corporate tax rates in the UAE

Mainland companies:

•  Taxable profit up to 375,000 dirhams is taxed at a rate of 0%.
•  Taxable profit exceeding 375,000 dirhams is taxed at a rate of 9%.

Free zone companies:

— For companies earning income from qualifying activities (Qualifying Free Zone Person), a corporate tax rate of 0% applies. To qualify for the zero rate, the following criteria for QFZP must be met:

•  the company's activities must be among the government-defined qualifying activities;
•  companies must operate within the free zone territory;
•  own a sufficient amount of assets;
•  have an adequate number of qualified employees;
•  demonstrate a sufficient level of operating expenses.

— If a company’s non-qualifying income exceeds 5% or 5 million AED of its total income (whichever is lower), the entire profit becomes subject to the standard 9% rate, ensuring alignment with UAE tax compliance standards.

In addition, the UAE has introduced a 15% domestic minimum top up tax for large multinational enterprise (MNE) groups that fall under the OECD Pillar Two framework. This regime generally applies to MNEs with consolidated global revenues of at least EUR 750 million in at least two of the four preceding financial years and is designed to ensure that such groups pay an effective tax rate of 15% on their UAE profits.

However, for the vast majority of small and medium sized businesses operating in the UAE, the applicable corporate tax regime remains the standard 0%/9% system, subject to the usual exemptions, reliefs and free zone rules described in this guide.

Small Business Relief:

Persons with revenue for the tax period up to 3 million dirhams may opt for the Small Business Relief tax regime and pay no corporate tax. If the threshold amount is exceeded, the right to apply SBR is lost. The program is valid until December 31, 2026.

Natural persons conducting business activities

This category includes freelancers, self-employed individuals, sole entrepreneurs, and other natural persons who conduct business based on a commercial license.

•  If the annual turnover from business activities is up to 1 million dirhams, the tax rate is 0%.
•  Upon exceeding the threshold of 1 million dirhams, natural persons must pay corporate tax at a rate of 9% on profits exceeding 375,000 dirhams.
•  Freelancers and sole entrepreneurs can apply for the Small Business Relief (SBR) regime if their revenue is up to 3 million dirhams.

Thus, with the SBR regime, the corporate tax rate for individuals can be reduced to 0% if their revenue does not exceed 3 million dirhams.

When the turnover reaches 1 million dirhams, individuals conducting business are required to register for corporate tax purposes and annually file a tax return.

Who is exempt from corporate tax?

The new tax rules do not apply to certain categories of persons:

•  Federal governments and the governments of the Emirates, their agencies, authorities, and other government entities;
•  State-owned enterprises;
•  Companies engaged in the exploration of natural resources in the UAE;
•  Public benefit organizations;
•  Investment funds;
•  Government and private pension funds and social security funds.

Which incomes are not subject to corporate tax?

The following types of personal income of individuals are generally not subject to UAE corporate tax, provided they are not derived from a business or business activity:

• Salaries and other employment income earned as an employee.
• Personal income from bank deposits, savings schemes and other personal investment products.
• Income from personally owned real estate and personal rental income, where the individual is not required to hold a business license for that activity.
• Dividends and capital gains from personally held shares and other personal investment assets.
• Inheritances and similar personal receipts.
• However, where such assets and activities are held through, or form part of, a business or company, the resulting income may fall within the scope of corporate tax under the standard rules.

Tax groups

Entities can form a tax group if: 

• the parent company holds at least 95% of the share capital, voting rights, and profits of the subsidiaries, 
• they share the same financial year and accounting standards, 
• neither the parent nor subsidiary can be classified as an exempt person or a Qualifying Free Zone Person.

Navigating corporate taxes in Dubai with Emirabiz

To conduct business in the UAE legally and transparently, avoiding potential tax and banking issues, all companies and individuals engaging in business activities in this country should carefully comply with tax obligations, file tax returns on time, and submit financial statements to the relevant authorities. Our team of experienced tax and business consultants and accountants can help you understand all the intricacies of taxation in the UAE. Contact us and we will address your concerns!

What has changed in the UAE corporate tax system

The UAE introduced a federal Corporate Tax, which is a direct tax on business profits, and it now applies across the country under the UAE Corporate Tax Law (Federal Decree-Law No. 47 of 2022), with policy driven by the Ministry of Finance and administration handled by the Federal Tax Authority (FTA). In practice, this means many businesses must treat tax as a normal part of operations: you calculate taxable income (profit after tax rules and adjustments), report it for a defined tax period (usually your financial year), and file on time.

Most of the process is handled online through EmaraTax, the FTA’s portal, and once you register, you receive a TRN (Tax Registration Number), which is your official ID for corporate tax filings and communication. If you are used to a “low-paperwork” setup, the shift is simple but important: clean bookkeeping and clear documentation now matter, because deadlines and penalties are enforced even when your final tax payable is small.

Critical updates: deadlines & penalties

Corporate tax is not expensive because of the rate. It becomes expensive when businesses miss deadlines, underestimate compliance, or register late and collect penalties that could have been avoided.

1. The AED 10,000 late registration penalty

If you miss your corporate tax registration deadline, you can face an administrative penalty of AED 10,000. This is a compliance fine, not a tax, and it can apply even if your eventual corporate tax due is zero.

2. The penalty waiver/refund logic

There is a published relief path where the late registration penalty can be waived or refunded if you meet certain conditions. In practical terms, the system rewards businesses that fix the problem quickly and file properly within a defined timeframe. In simple terms:

• If you are late, the next step is not “do nothing.”
• You typically want to align your first filing timing with the relief conditions that may apply.

3. What people miss most often

4. DMTT (Domestic Minimum Top-up Tax): mostly for large groups

You may see “DMTT” in 2025–2026 updates. Basically, it is a minimum tax concept designed mainly for large multinational groups under global minimum tax rules. Most SMEs and typical free zone startups will not be directly affected by DMTT. If you are part of a very large group, treat this as a separate technical topic and get targeted advice.

5. E-invoicing pilot phase 2026

E-invoicing is part of the UAE’s wider compliance direction, with a pilot phase expected in 2026. Even if you think “this is only for VAT”, better invoice data usually means cleaner accounting and easier corporate tax reporting.

Practical takeaway

• If your accounting is “PDF invoices + manual fixes,” you’re taking unnecessary risk.
• Clean records reduce errors, reduce disputes, and reduce last-minute panic.

6. What to do today

• Identify whether you must register for corporate tax (entity type + activity + where you operate).
• Confirm your registration deadline and treat it as a hard compliance task.
• If you are already late, register and plan your first filing properly instead of waiting.

Corporate Tax rates: how much you pay

The UAE corporate tax rate is simple on paper. The real work is understanding what counts as taxable income and how reliefs apply. The two main rates are:

• 0% on taxable income up to AED 375,000
• 9% on taxable income above AED 375,000

Example:

If your taxable income is AED 500,000, then AED 375,000 is taxed at 0% and AED 125,000 is taxed at 9%. That means corporate tax of AED 11,250.

“Taxable income” vs “accounting profit”

Your financial statements show accounting profit. Corporate tax is calculated on taxable income, which starts with accounting profit and then applies adjustments required by tax rules.

Why the numbers differ:

• Some expenses are only partly deductible (for example, certain entertainment).
• Some transactions need special treatment (for example, related-party pricing).
• Some reliefs or exemptions may apply depending on your status.

Small Business Relief (SBR)

Small Business Relief is designed to make corporate tax easier for smaller businesses. The headline condition most people remember is revenue of AED 3,000,000 or below (for eligible periods within the relief window).

The key detail is that this is about revenue, not profit. Revenue is your top-line sales, while profit is what remains after expenses.

Tips:

• Don’t assume it’s automatic and apply it correctly in your return if eligible.
• Use proper accounting records.
• Don’t try to manipulate structure purely to stay under thresholds.

Corporate Tax for free zones: QFZP, qualifying income, excluded activities, de minimis

This is where many founders get surprised. A free zone license does not mean “0% corporate tax on everything” because the 0% path is conditional.

Key terms:

• Qualifying free zone person (QFZP): a free zone business that meets conditions to get 0% on certain income.
• Qualifying income: income types that can benefit from the free zone 0% pathway.
• Excluded activities: activities that can disqualify income from the 0% pathway.
• De minimis threshold: a tolerance rule for small amounts of non-qualifying revenue.

The de minimis threshold

As a practical rule, de minimis is often discussed as a limit where non-qualifying revenue should not exceed 5% of total revenue or AED 5,000,000, whichever is lower. If you cross it, you can lose the QFZP benefit for the period.

QFZP

Being QFZP is not only about a license and an address. Essentially, you want to be able to prove your status with real operations and clean documentation. The QFZP requirements are:

• Adequate substance: real presence and operations that match what you claim to do.
• Audited financial statements: audited accounts are commonly required for QFZP compliance.
• Clear income tracking: evidence of what is qualifying vs non-qualifying.

What can go wrong

• The business earns income linked to Excluded Activities and doesn’t realize it breaks the 0% logic.
• The company mixes income streams and cannot separate the qualifying from the non-qualifying correctly.
• The company cannot demonstrate substance, especially if operations are “light” on paper.

Corporate Tax for natural persons and freelancers

This part is for freelancers and consultants who ask: “Do I personally fall under corporate tax?” The short answer is: you may, if you run a business activity and your turnover crosses a threshold.

If your annual turnover from business activity exceeds AED 1,000,000 in a calendar year, you generally become subject to corporate tax obligations (including registration and filing). Turnover here means business revenue, not profit – it is the total revenue from your business activity before costs. It is not your personal salary, and it is not your net profit.

Signs indicating that you are in scope:

• You invoice clients for services (consulting, marketing, IT, design, training).
• You trade goods as an individual.
• Your business turnover can exceed AED 1 million in a year.

Common misunderstandings

• “I’m a freelancer, so corporate tax doesn’t apply.” It can apply if turnover crosses AED 1 million.
• “My salary counts toward AED 1 million.” The trigger focuses on business turnover.
• “If turnover drops next year, everything resets.” Registration and filing obligations can still apply depending on your status and timeline.

Natural person vs company

Deductions: what you can and can’t subtract

Corporate tax starts from accounting results and then applies tax rules. The biggest practical risk is claiming expenses too casually and later finding out they are disallowed or limited.

Deductible vs non-deductible

A deductible expense is a legitimate business cost you can subtract when calculating taxable income. A non-deductible (or partially deductible) expense is a cost that the rules do not allow in full.

Deductions in entertainment businesses

Business entertainment expenses are commonly subject to a 50% deduction rule. This is one of the most frequent “surprise adjustments” for businesses that track expenses loosely.

Entertainment expenses that often fall under the 50% limit:

• Client meals and hospitality
• Partner invitations and event tickets
• Similar relationship-building spending connected to business

Interest deduction cap (30% EBITDA)

If your business pays interest on borrowing, you may not be able to deduct all of it. A common rule is a cap linked to 30% of EBITDA (profit before interest, tax, depreciation, and amortization), using tax-adjusted figures. In practice, this means:

• Highly leveraged structures can produce higher taxable income than expected.
• You need clean calculations and documents, especially for related-party loans.

Transfer pricing: “arm’s length”

If you deal with related parties (group companies or connected persons), prices should look like market prices. “Arm’s length” basically means “what you would charge an unrelated company.”

Where transfer pricing shows up often

• Management fees within a group
• Intercompany loans and interest
• Buying/selling goods or services within the group

Registration & filing: EmaraTax, TRN, and the 9-month deadline

Corporate tax registration and filing happen online through EmaraTax. Once registration is approved, you receive a TRN, which you will use for corporate tax filings and communication.

EmaraTax registration steps:

1. Create or log in to your EmaraTax account.
2. Create or select the taxable person profile in your dashboard.
3. Complete and submit the corporate tax registration application.

The filing deadline

A common rule is that you file your corporate tax return and settle tax due within 9 months from the end of your tax period. For many businesses using a calendar year, that means year-end 31 December and deadline 30 September of the following year.

Practical filing checklist

• Confirm your financial year end and treat it as a fixed reference point.
• Keep bookkeeping clean enough to produce a profit figure you can explain.
• Don’t leave it to the last week, because missing documents and portal delays happen.

Exempt persons

Some persons are exempt from corporate tax. “Exempt” usually means you may not pay corporate tax, but you still need to understand the conditions and compliance steps.

Main exemption categories:

• Government entities
• Extractive and natural resource businesses (usually under specific conditions)
• Qualifying public benefit entities
• Pension and social security funds
• Qualifying investment funds (typically with conditions)

It’s important to remember that being exempt does not always mean “no paperwork”. Some exempt persons may still need to register, submit declarations, or keep records to demonstrate they qualify. The clean approach is to treat exemption like a status you must support, not a label you assume.

Taxable vs exempt

Conclusion: your 2026 priority list

Corporate tax becomes manageable when you treat it like a routine, not an emergency. The goal is simple: register on time, keep records clean, and file within the deadline. Here is a simple list of necessary things that will help you avoid unnecessary complications:

• Confirm whether you must register and identify your registration deadline.
• Lock your financial year end, then mark the 9-month filing deadline.
• If you are in a free zone, check QFZP conditions and track qualifying vs non-qualifying income.
• If you are a freelancer or sole owner, monitor business turnover against AED 1 million.
• Keep a compliance folder: license, financials, invoices, contracts, bank statements, and key calculations.

FAQ

Is corporate tax applicable to salary in the UAE?

No. Corporate tax targets business profits, not employee salaries. For individuals, corporate tax becomes relevant when business turnover crosses thresholds, and the person is effectively carrying on a business.

What is the difference between VAT and Corporate Tax?

VAT is a tax linked to sales transactions, while corporate tax is a tax on profit. VAT is usually reported through VAT returns, while corporate tax is usually filed for a tax period (often yearly).

Can I carry forward tax losses?

In general, tax losses can be used to reduce taxable income in future periods, but the rules have conditions. Treat losses as a regulated tax concept and keep strong documentation, rather than assuming any accounting loss is automatically usable.

What is a Tax Group in the UAE?

A Tax Group is a corporate tax arrangement where qualifying group companies can be treated as one taxable person. It can simplify reporting for groups, but eligibility and conditions matter, so it is not a “one-click” choice.