The UAE Corporate Tax came into force in June 2023 — and 2026 is the first year most businesses are filing their second full return. The headline rate is 9% on profits above AED 375,000, but with carve-outs for free zone qualifying income and small business relief, the real picture is more nuanced. Here's how it works.
The headline rates
| Income tier | Tax rate |
|---|---|
| First AED 375,000 of taxable profit | 0% |
| Profit above AED 375,000 | 9% |
| Free zone "qualifying income" | 0% |
| Free zone "non-qualifying income" | 9% (from first AED) |
| Multinational enterprises (Pillar Two) | 15% effective from 1 Jan 2025 (revenue ≥ EUR 750m) |
The 0% band applies per group, not per company — corporate groups under common control share the AED 375,000 threshold proportionally.
Who pays
- UAE-incorporated companies (mainland LLCs, free zone companies, civil partnerships).
- Branches of foreign companies operating in the UAE.
- Natural persons (freelancers, sole proprietors) with annual UAE business turnover above AED 1,000,000.
- Non-residents earning income from UAE state-sourced activities (with treaty modifications).
Who is exempt
| Exempt category | Notes |
|---|---|
| UAE Government and government-controlled entities | Automatic — no application |
| Extractive businesses (oil, gas, mining) | Subject to emirate-level taxation instead |
| Non-extractive natural resources businesses | Same as above |
| Qualifying public benefit entities | Approval required — Cabinet listing |
| Qualifying investment funds | Approval required — FTA listing |
| Public / private pension and social security funds | Approval required |
| Wholly-owned UAE subsidiaries of exempt persons | Apply for exemption status |
Personal income (employment salary, dividends, interest from personal savings, rental from personal real estate) is not subject to corporate tax — there is no UAE personal income tax.
The free zone qualifying-income test
This is where most planning effort happens. To pay 0% on qualifying income, a free zone person must:
- Maintain adequate substance in the free zone — physical office, qualified employees, core income-generating activities.
- Derive qualifying income, defined as:
- Income from transactions with other free zone persons (intra-zone).
- Income from designated activities (manufacturing, processing, holding shares, fund management, headquarters services to related parties).
- Income from "qualifying intellectual property" (with research / development substance test).
- Export income outside the UAE.
- Not exceed the de minimis allowance for non-qualifying income (5% of total revenue or AED 5,000,000, whichever is lower).
- Comply with transfer pricing and prepare audited financial statements.
- Not elect to be subject to standard 9% corporate tax.
Failing any criterion in a financial year forfeits the 0% rate for that year — the entire profit becomes taxable at 9% from the first dirham.
Small business relief
Companies with annual revenue below AED 3,000,000 may elect "small business relief" — treated as having no taxable income for the year, no tax due, simplified filing. Available for tax periods ending on or before 31 December 2026. Plan ahead — this relief is a one-time election available only while the threshold rules apply.
Worked examples
| Scenario | Taxable profit | Tax due (AED) |
|---|---|---|
| Mainland LLC, AED 250,000 profit | 250,000 | 0 (under threshold) |
| Mainland LLC, AED 500,000 profit | 500,000 | 11,250 (9% × 125,000) |
| Mainland LLC, AED 1,000,000 profit | 1,000,000 | 56,250 (9% × 625,000) |
| Free zone qualifying, AED 1,000,000 profit (all qualifying) | 1,000,000 | 0 |
| Free zone, AED 1,000,000 profit (non-qualifying) | 1,000,000 | 90,000 (9% × 1,000,000) |
| Small business relief, AED 2,000,000 revenue | 0 (elected) | 0 |
The annual filing calendar
| Financial year-end | Filing & payment deadline |
|---|---|
| 31 December | 30 September of the following year |
| 31 March | 31 December |
| 30 June | 31 March of the following year |
| 30 September | 30 June of the following year |
Returns are filed through EmaraTax. Payments are made by direct debit or bank transfer to the FTA's GIBAN account. Late payments accrue interest at 14% per annum, calculated monthly.
Common planning levers
- Group structuring — tax groups can offset profits and losses across UAE entities.
- Substance investment — for free zone groups, modest investment in office and headcount can preserve 0% on millions of profit.
- Transfer pricing — related-party transactions must be at arm's length; documented benchmarking protects against FTA challenge.
- Loss carry-forward — taxable losses can be carried forward indefinitely, subject to 75% utilisation cap and ownership-continuity rules.
- Capital expenditure timing — accelerated depreciation choices affect taxable profit.
- Dividends — UAE-source dividends and capital gains on qualifying participations are exempt under the participation exemption.
Frequently asked questions
Is my salary subject to UAE corporate tax?
No. There is no UAE personal income tax on employment income. Corporate tax applies only to business income.
Are dividends from a UAE company taxable?
Dividends paid by a UAE company to another UAE company are typically exempt under the participation exemption (5% holding, held for 12 months). Dividends to individuals are not taxable in the UAE at any level.
Do I need audited accounts to file?
Mainland LLCs and free zone qualifying persons require audited financial statements. Small business relief filers and pass-through partnerships may be exempt from the audit requirement but must still maintain proper records.
Can a foreign branch in the UAE deduct head-office costs?
Yes, subject to the arm's-length principle and proper documentation of the cost-allocation methodology.
What's the penalty for not filing on time?
AED 500 per month for the first 12 months, increasing to AED 1,000 per month thereafter, plus 14% annual interest on unpaid tax.
Can I claim foreign tax credits?
Yes — UAE corporate tax allows a credit for foreign tax paid on the same income, capped at the amount of UAE tax that would otherwise apply.
How we help
Visa Simplified works with FTA-licensed tax agents to handle annual filings, transfer pricing documentation, free zone qualifying-income reviews, and group structuring. See our FTA & tax services. If you haven't yet registered, see our companion guide on UAE Corporate Tax registration on EmaraTax first.
Need help with this?
Our PRO consultants handle the full process end-to-end — documents, government submission, and delivery. Service fee is fully refundable pre-submission.