The UAE introduced a federal Corporate Tax (CT) regime under Federal Decree-Law No. 47 of 2022. For most businesses, the new tax applies to financial years beginning on or after 1 June 2023. At 9%, the UAE CT rate is one of the lowest in the world, but understanding who must register, what income is taxable, and what exemptions apply is essential for every UAE business owner.
UAE Corporate Tax Rates at a Glance
| Taxable Income | CT Rate |
|---|---|
| AED 0 to AED 375,000 | 0% |
| Above AED 375,000 | 9% |
| Qualifying Free Zone Persons (on qualifying income) | 0% |
| Large multinationals (Pillar Two) | 15% minimum |
Who Must Register for Corporate Tax?
All UAE-incorporated businesses — mainland companies, free zone companies, and foreign entities with a permanent establishment in the UAE — must register with the Federal Tax Authority (FTA) for corporate tax purposes, even if they expect to owe zero tax. Failure to register is subject to administrative penalties.
The AED 375,000 Small Business Threshold
Taxable income up to AED 375,000 is taxed at 0%. A business earning AED 500,000 in net profit pays 9% only on AED 125,000 (the amount above the threshold), resulting in effective tax of AED 11,250 — an effective rate of just 2.25%.
Small Business Relief
Businesses with revenue of AED 3 million or below can elect for Small Business Relief for tax periods ending on or before 31 December 2026. This treats taxable income as zero, simplifying compliance significantly for micro-enterprises and startups.
Free Zone Companies and the 0% Qualifying Rate
Qualifying Free Zone Persons (QFZPs) can benefit from a 0% CT rate on qualifying income — broadly, income derived from transactions with other free zone companies or certain foreign-sourced income. Non-qualifying income (such as mainland UAE sales) is taxed at the standard 9% rate.
What Expenses Are Deductible?
Business expenses wholly and exclusively incurred for the purpose of earning taxable income are generally deductible. These include salaries, rent, depreciation, interest (subject to a 30% EBITDA limitation for related-party interest), professional fees, and marketing costs.
CT Return Filing
CT returns must be filed within 9 months of the end of the tax period. For a business with a December year-end, this means filing by 30 September of the following year. Late filing attracts administrative penalties.
Key Action Points for UAE Business Owners
- Register for corporate tax with the FTA before your registration deadline
- Engage a qualified accountant to assess your taxable income and applicable exemptions
- Review your free zone status if you are a Qualifying Free Zone Person
- Set up proper accounting records — CT requires IFRS-compliant financial statements
- Consider Small Business Relief if your revenue is AED 3M or below