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UAE corporate tax is 9% on taxable profits above AED 375,000. Businesses with profits below AED 375,000 pay 0%. Most UAE free zone companies qualify for 0% if they meet substance requirements. Registration is mandatory for all UAE businesses regardless of profit level.
The UAE introduced corporate tax on 1 June 2023 under Federal Decree-Law No. 47 of 2022. For most businesses, this means a 9% tax on net profits above AED 375,000 per financial year. If your business earns below this threshold, the rate is 0% — but registration with the Federal Tax Authority (FTA) is still mandatory.
This guide covers who pays UAE corporate tax, what qualifies as taxable income, how free zone exemptions work, registration deadlines, and the compliance steps your business needs to follow. We have written this for business owners and investors — not tax lawyers.
Who Pays UAE Corporate Tax?
UAE corporate tax applies to all juridical persons incorporated in the UAE and foreign entities with a permanent establishment here. This includes mainland LLCs, sole establishments, civil companies, and branch offices of foreign companies.
Who is subject to corporate tax:
- UAE mainland companies (LLCs, sole establishments, civil companies)
- Foreign companies with a permanent establishment in the UAE
- Individuals conducting business under a commercial licence
- Banking operations of foreign banks operating in the UAE
Who is exempt or outside scope:
- UAE government entities and government-controlled entities
- Extractive businesses (oil, gas, mining) — subject to Emirate-level tax instead
- Qualifying public benefit organisations
- Qualifying investment funds meeting FTA conditions
- Individuals earning salary income only (no business licence)
The 9% Rate Explained
The UAE corporate tax rate structure has three tiers. Understanding which tier applies to your business is the first step in any compliance plan.
| Taxable Income | Rate | Who This Applies To |
|---|---|---|
| AED 0 – AED 375,000 | 0% | All taxable businesses — small business relief |
| Above AED 375,000 | 9% | Standard rate for mainland and non-qualifying free zone entities |
| Multinational groups (BEPS Pillar Two) | 15% | Groups with global revenues above EUR 750 million |
The AED 375,000 threshold is per financial year. Businesses below the threshold still register — they simply file a nil return.
Free Zone Corporate Tax — The 0% Exemption
Free zone companies can qualify for a 0% corporate tax rate — but only as Qualifying Free Zone Persons (QFZPs). Meeting this standard requires genuine economic substance, not just a registered address.
What Makes a Free Zone Company Qualifying?
- Maintains adequate substance in the free zone (office space, employees, operations)
- Derives income only from Qualifying Activities (trading with foreign clients, intra-group services, shipping, fund management)
- Does not earn Domestic State Sourced Income above the de minimis threshold (5% of total revenue or AED 5 million)
- Complies with transfer pricing rules
- Is not an individual (natural person)
What Disqualifies a Free Zone Company?
If your free zone company earns revenue from UAE mainland clients — providing services directly to Dubai-based companies without a mainland intermediary — that income becomes Domestic State Sourced Income and breaks qualifying status for the entire year. The entire entity then becomes subject to 9% on all profits above AED 375,000.
If your free zone business sells to UAE mainland customers, get a compliance review before your first tax period closes.
Corporate Tax Registration — Deadlines and How to Register
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All UAE businesses — mainland and free zone — must register for corporate tax with the Federal Tax Authority, regardless of whether they will owe any tax. Failure to register results in penalties starting at AED 10,000.
Registration Deadlines
| Business Type | Registration Deadline |
|---|---|
| Incorporated before 1 March 2024 | Within 3 months of financial year-end |
| Incorporated on or after 1 March 2024 | Within 3 months of incorporation date |
| Foreign entities with UAE permanent establishment | Within 3 months of establishing the PE |
How to Register (Step by Step)
- Access the EmaraTax portal at tax.gov.ae using your UAE Pass or Emirates ID
- Select Register for Corporate Tax from the services menu
- Enter your trade licence details, financial year start date, and entity type
- Upload supporting documents (trade licence, MOA, proof of address)
- Submit — FTA processes registration within 20 business days
- Receive your Tax Registration Number (TRN) by email
- File your first corporate tax return within 9 months of your financial year-end
What Counts as Taxable Income?
UAE corporate tax is levied on taxable income — which starts with your accounting net profit and is then adjusted for specific add-backs and deductions permitted under the law.
- Dividends received from UAE subsidiaries: exempt (participation exemption)
- Capital gains on qualifying shareholdings: exempt
- Unrealised gains/losses: can be excluded if elected
- Entertainment expenses: 50% deductible only
- Fines and penalties: not deductible
- Interest expense: subject to a 30% EBITDA cap
- Related party transactions: must be at arm's length (transfer pricing applies)
If your business has intercompany transactions — loans, management fees, royalties — or significant interest expense, transfer pricing compliance is not optional. Document your arm's length pricing before your first filing.
Penalties for Non-Compliance
| Violation | Penalty |
|---|---|
| Failure to register | AED 10,000 |
| Late registration | AED 10,000 |
| Failure to file return | AED 500/month (first 12 months), AED 1,000/month thereafter |
| Failure to maintain records | AED 10,000 (first instance), AED 50,000 (repeat) |
| Failure to pay tax due | 14% per annum on unpaid amount |
Frequently Asked Questions
Q: Does a UAE free zone company always pay 0% corporate tax?
No. Free zone companies pay 0% only if they qualify as a Qualifying Free Zone Person (QFZP). To qualify, they must have genuine economic substance in the free zone and must not earn income from UAE mainland sources above the de minimis threshold. If either condition is not met, the standard 9% rate applies.
Q: Do I need to register for corporate tax if my profits are below AED 375,000?
Yes. Registration is mandatory for all UAE businesses regardless of profit level. Businesses below the threshold file a nil return and pay 0% tax, but failing to register carries a AED 10,000 penalty.
Q: When does UAE corporate tax apply to me?
Corporate tax applies from the start of your first financial year that begins on or after 1 June 2023. If your financial year runs January-December, your first taxable period was 1 January 2024 to 31 December 2024, with a return due by 30 September 2025.
Q: Can I deduct my salary from taxable income?
If you are a sole proprietor or civil company owner drawing a salary, the deductibility depends on whether the salary is at arm's length market rate. Excessive owner salaries used purely to reduce taxable income will be disallowed.
Q: What is small business relief?
Small business relief allows businesses with revenue below AED 3 million in a tax period to elect to be treated as having zero taxable income for that period. It is available for tax periods up to 31 December 2026. Businesses that elect small business relief cannot use carried-forward losses.
Not Sure How Corporate Tax Applies to Your Business?
Most compliance mistakes happen before the first filing deadline — wrong entity classification, unreported mainland revenue in a free zone company, or missed registration. Henry Club's advisory team reviews your structure before it becomes a problem.
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About the Author
Dubai-based independent advisor on UAE visa, immigration, and offshore structuring. Founder of Henry Club UAE with 90+ published guides. Advisory-first — clarity before commitment.