UAE Corporate Tax 9%: Complete Guide for Businesses (2026)
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Browse NowCorporate tax is here permanently. The UAE introduced a 9% federal corporate tax effective June 2023, ending decades of near-zero taxation for businesses. At 9%, it remains among the lowest globally — but the details determine whether you actually pay 0%, 9%, or face penalties.
This guide covers everything business owners need to know. For professional help, browse our directory of corporate tax advisors in the UAE.
What Is UAE Corporate Tax?
UAE corporate tax is a federal tax on the net profits of businesses operating in or deriving income from the UAE, enacted under Federal Decree-Law No. 47 of 2022. The rate is 0% on taxable income up to AED 375,000 and 9% on income above that threshold. Free zone companies qualifying as a QFZP pay 0% on qualifying income. All taxable persons must register with the FTA and file annual returns — regardless of profitability.
The corporate tax applies to:
- All UAE-incorporated companies (mainland, free zone, offshore with UAE-sourced income)
- Foreign entities with a permanent establishment in the UAE or UAE-sourced income
- Individuals conducting business in the UAE with annual turnover above AED 1 million
- Partnerships that are treated as separate legal persons
The tax is calculated on accounting profits prepared under IFRS, with specific adjustments defined in the law.
Who Pays UAE Corporate Tax?
Every legal person with a trade license or conducting business in the UAE is potentially subject to corporate tax. This includes mainland LLCs, free zone companies, sole establishments, branches of foreign companies, and freelancers exceeding AED 1 million in annual turnover. Exempt entities are limited to government bodies, qualifying charities, pension funds, and regulated investment funds meeting specific criteria.
Corporate Tax Applicability
| Entity Type | Subject to Corporate Tax? | Rate |
|---|---|---|
| Mainland LLC | Yes | 9% above AED 375,000 |
| Free zone company (QFZP) | Yes — but qualifying income at 0% | 0% / 9% split |
| Free zone company (non-QFZP) | Yes | 9% above AED 375,000 |
| Sole establishment | Yes | 9% above AED 375,000 |
| Branch of foreign company | Yes — on UAE-sourced income | 9% above AED 375,000 |
| Freelancer (above AED 1M) | Yes | 9% above AED 375,000 |
| Freelancer (below AED 1M) | No | Exempt |
| Government entity | No | Exempt |
| Qualifying charity | No | Exempt (if listed in Cabinet Decision) |
| Public pension fund | No | Exempt |
Exempt Income
Not all income is taxable. The following are specifically exempt:
- Dividends from UAE-resident companies (participation exemption)
- Capital gains from qualifying shareholdings
- Income from personal investments (for individuals not conducting business)
- Qualifying intra-group transactions (subject to conditions)
How Is Taxable Income Calculated?
Taxable income starts from your IFRS accounting profit and applies specific additions and deductions prescribed by the law. Non-deductible expenses are added back; exempt income is deducted; and specific adjustments for entertainment (50% cap), interest (general interest deduction limitation), and prior-period items produce the final taxable income figure.
Taxable Income Calculation
| Step | Description | Example (AED) |
|---|---|---|
| Start | Accounting profit (per IFRS) | 2,000,000 |
| Add | Non-deductible expenses (fines, penalties, donations to non-qualifying entities) | +50,000 |
| Add | Entertainment above 50% limit | +25,000 |
| Add | Provisions not yet realized (ECL, general) | +30,000 |
| Deduct | Exempt income (qualifying dividends, capital gains) | -100,000 |
| Deduct | Small Business Relief (if applicable) | -0- |
| Result | Taxable income | 2,005,000 |
| Tax | 0% on first AED 375,000 | 0 |
| Tax | 9% on AED 1,630,000 | 146,700 |
| Total tax | 146,700 |
Deductible vs. Non-Deductible Expenses
| Category | Deductible | Non-Deductible |
|---|---|---|
| Employee costs | Salaries, bonuses, EOSG | Owner's personal expenses |
| Entertainment | 50% of total | Remaining 50% |
| Fines and penalties | Never | 100% — always add back |
| Donations | To qualifying charities (capped at 10% of taxable income) | To non-qualifying entities |
| Interest expense | Subject to general interest deduction limitation rule | Excess above limitation |
| Depreciation | At IFRS rates on business assets | On non-business assets |
| Pre-trading expenses | If incurred for business purposes | Personal or unrelated expenses |
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What Is the QFZP 0% Rate for Free Zone Companies?
A Qualifying Free Zone Person (QFZP) is a free zone company that meets specific substance, income, and documentation requirements — entitling it to a 0% corporate tax rate on qualifying income. Non-qualifying income remains taxed at 9%. The conditions include maintaining adequate substance, earning qualifying income, having audited IFRS financials, and complying with transfer pricing rules.
QFZP Conditions
| Condition | Requirement |
|---|---|
| Substance | Adequate employees, assets, and expenditure in the free zone |
| Qualifying income | Income from other FZ persons or foreign-sourced income |
| Non-qualifying income | Must not exceed de minimis threshold (AED 5M or 5% of total) |
| Audit | Audited financial statements under IFRS — mandatory |
| Transfer pricing | Arm's length pricing with documentation |
| Election | Must not have elected out of the QFZP regime |
Qualifying vs. Non-Qualifying Income
| Income Type | Classification |
|---|---|
| Services to other free zone companies | Qualifying |
| Export of goods to outside UAE | Qualifying |
| Passive income (interest, royalties from FZ persons) | Qualifying |
| Services to mainland UAE clients | Non-qualifying |
| Revenue from UAE consumers | Non-qualifying |
| Income from immovable property in the UAE | Non-qualifying |
For a detailed guide on free zone tax treatment, read our guide to qualifying income for free zone companies.
What Is Small Business Relief?
Small Business Relief allows resident taxable persons with revenue of AED 3 million or less to treat their taxable income as zero for the tax period. This means no corporate tax is payable. The relief is claimed on the tax return — you must still register, file, and maintain records. The AED 3 million threshold applies to the current period and all previous periods.
Small Business Relief Eligibility
| Criterion | Requirement |
|---|---|
| Resident taxable person | Must be a UAE tax resident |
| Revenue threshold | AED 3 million or less in current and all prior periods |
| Free zone person | Not eligible — SBR is for mainland entities only |
| Qualifying group | May not be part of a multinational group |
| Claim method | Elected on the corporate tax return |
Small Business Relief vs. Standard Filing
| Aspect | With SBR | Without SBR |
|---|---|---|
| Tax registration | Required | Required |
| Return filing | Required | Required |
| Record maintenance | Required | Required |
| Taxable income | Treated as zero | Calculated per standard rules |
| Tax payable | AED 0 | 9% on income above AED 375,000 |
| Transfer pricing | Simplified | Full documentation |
| Audited financials | Not required for SBR | Required for QFZP |
For detailed small business guidance, read our corporate tax guide for small businesses.
What Are the Registration and Filing Requirements?
All taxable persons must register for corporate tax with the FTA through EmaraTax. The registration deadline depends on your license issuance date — existing companies had assigned deadlines, new companies must register within three months. Annual returns are due within nine months of the tax period end. Late registration costs AED 10,000; late filing costs AED 500 per month.
Key Deadlines
| Obligation | Deadline | Penalty |
|---|---|---|
| Tax registration | License-date dependent (existing) or 3 months (new) | AED 10,000 |
| Annual return filing | 9 months from tax period end | AED 500/month (first 12 months) |
| Tax payment | 9 months from tax period end | 14% per annum interest |
| Record maintenance | Ongoing — 7 year retention | FTA may estimate tax liability |
Filing Process
- Register on EmaraTax and obtain your Tax Registration Number (TRN)
- Maintain IFRS-compliant accounting records throughout the tax period
- Prepare financial statements — audited if required (QFZP entities)
- Calculate taxable income with prescribed adjustments
- Complete the tax return on EmaraTax
- Pay any tax due through approved payment channels
- Retain all records for seven years
For the complete registration timeline, read our corporate tax registration timeline guide.
What Are the Transfer Pricing Rules?
All transactions between related parties and connected persons must be conducted at arm's length — meaning the price must reflect what independent parties would agree. The FTA requires a disclosure form with every tax return and may request master file, local file, and country-by-country reporting. Non-compliance can result in income adjustments and penalties.
Transfer Pricing Documentation Thresholds
| Document | Required When | Content |
|---|---|---|
| Disclosure form | All entities with related party transactions | Summary of transactions (filed with return) |
| Local file | Related party transactions in the period | Detailed analysis with benchmarking |
| Master file | Group revenue above AED 3.15 billion | Group-wide transfer pricing policies |
| Country-by-country report | Group revenue above AED 3.15 billion | Revenue, profit, tax by jurisdiction |
Common Transfer Pricing Scenarios
| Transaction | Arm's Length Test | Risk Level |
|---|---|---|
| Management fees from mainland to free zone | Must reflect actual services at market rate | High |
| Intercompany loans | Interest rate must match market rates | High |
| IP licensing fees | Royalty must reflect IP value and usage | Very high |
| Shared services allocation | Cost-plus with appropriate markup | Moderate |
| Goods sold between related parties | Comparable pricing required | Moderate |
Frequently Asked Questions
Do I need to pay corporate tax if my company makes a loss?
No tax is payable on a loss. However, you must still register, file a return showing the loss, and maintain records. Tax losses can generally be carried forward to offset against future taxable income (subject to conditions including a 75% limitation on offset).
Can I offset losses from one business against profits from another?
Tax grouping provisions allow related UAE-resident companies to form a tax group, enabling the offset of losses from one group member against profits of another. Specific ownership and residency conditions must be met. Consult a tax advisor to determine if grouping is beneficial for your structure.
Is corporate tax payable on revenue or profit?
On profit — specifically, on taxable income, which starts from your accounting profit under IFRS with specified adjustments. Revenue is not the tax base. A company with AED 10 million in revenue but only AED 300,000 in profit would pay zero corporate tax (below the AED 375,000 threshold).
Do foreign companies need to pay UAE corporate tax?
Only if they have a permanent establishment in the UAE or derive UAE-sourced income. A foreign company selling goods to a UAE customer from outside the UAE, with no physical presence, generally does not have a UAE corporate tax obligation. However, the definition of permanent establishment is broad and includes dependent agents.
How does corporate tax interact with VAT?
They are entirely separate taxes. VAT is an indirect tax on consumption (5% charged on supplies). Corporate tax is a direct tax on business profits (9% on taxable income). VAT paid on purchases is generally recoverable as input tax and does not affect your profit calculation. The two taxes have separate registrations, returns, and payment deadlines.
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