Corporate Tax

UAE Corporate Tax: Who Pays the 9%, and How It’s Calculated

9 min read·Updated 16 Jun 2026

For most of the UAE’s history, running a business here meant paying no tax on profits. That changed with Federal Decree-Law No. 47 of 2022, which introduced a federal Corporate Tax (CT) on business profits for financial years beginning on or after 1 June 2023. For a company whose financial year runs from January to December, the first taxable period was the 2024 calendar year, with the first return due by 30 September 2025.

The rate everyone quotes is 9%. But the number on its own tells you very little — what matters is what it applies to, who is exempt, and the deadlines that carry fixed penalties whether or not you owe a single dirham. This guide walks through all of it in plain language.

The two-tier rate: 0% and 9%

UAE Corporate Tax has a simple two-tier structure. You pay 0% on the first AED 375,000 of taxable income, and 9% on everything above that. The 9% applies only to the portion above the threshold — not to your whole profit.

A worked example makes this clear. A Dubai trading company with AED 800,000 of taxable income pays nothing on the first AED 375,000, and 9% on the remaining AED 425,000 — which is AED 38,250 for the year. It does not pay 9% on the full AED 800,000.

Threshold is on income, not revenue

The AED 375,000 figure is a taxable-income threshold, not a revenue one. Taxable income is your revenue minus allowable deductions (business expenses, depreciation, interest within limits). A business with AED 600,000 of revenue but AED 300,000 of allowable expenses has AED 300,000 of taxable income — below the threshold — and pays 0%.

Who actually falls inside Corporate Tax?

Three broad categories are within scope. Understanding which one you are in is the first step.

→Resident juridical persons — UAE-incorporated companies, LLCs, and other entities holding a UAE trade licence. These are taxed on their worldwide income.
→Non-resident juridical persons — taxed on UAE-sourced income and on profits attributable to a Permanent Establishment in the country.
→Natural persons (individuals) — an individual carrying on a licensed business or business activity falls inside Corporate Tax only when turnover from that UAE business activity exceeds AED 1 million in a calendar year. Salary, personal investment income, and eligible personal real-estate investment income do not count toward this threshold.

The threshold applies per taxable person — don’t try to split

A common (and risky) instinct is to split a business into two companies so each gets its own AED 375,000 band. This does not work. The threshold applies per taxable person, and the FTA can treat artificial arrangements as abusive under the General Anti-Abuse Rule. A single AED 800,000 business reorganised into two AED 400,000 companies does not legitimately double the relief, and attempting it invites scrutiny rather than savings.

Free Zone companies: 0%, but only on Qualifying Income

Free Zone businesses are often misunderstood. Being in a Free Zone does not automatically mean 0% tax. A Free Zone company is still within the Corporate Tax regime, still has to register, and still has to file. The 0% rate applies only to a Qualifying Free Zone Person (QFZP) earning Qualifying Income.

To keep QFZP status, a Free Zone company must satisfy several conditions: maintain adequate substance in the UAE, earn Qualifying Income, apply the arm’s-length principle and keep transfer-pricing documentation, prepare audited financial statements, and not elect to be taxed under the standard regime. Crucially, its non-qualifying revenue must stay under a de minimis limit — the lower of 5% of total revenue or AED 5 million.

A QFZP breach is a five-year problem

If a Free Zone company breaches the de minimis limit — even slightly — it loses QFZP status not just for that year but for the next four tax years too. During that period it pays 9% on all income, qualifying or not. For a large exporter, that can be an enormous cost from a small slip, which is why tracking non-qualifying revenue carefully matters.

Small Business Relief: pay zero, but you must elect it

Small Business Relief (SBR) is the most widely useful provision for SMEs. A resident business with total revenue of AED 3 million or less in a tax period can elect to be treated as having zero taxable income for that period — meaning no Corporate Tax to calculate and nothing to pay.

Two things catch people out. First, SBR is not automatic: you must actively elect it through the EmaraTax portal when you file. Second, it is a transitional measure — under current rules it applies to tax periods ending on or before 31 December 2026. Beyond that, unless the relief is extended, businesses fall back to the standard 0%/9% calculation.

Registration: the deadline that fines you even at AED 0 tax

This is the part that costs UAE owners the most — not the tax, the registration penalty. Every taxable person must register for Corporate Tax on EmaraTax, and the deadline is a legal one with a fixed AED 10,000 penalty for missing it, introduced under Cabinet Decision No. 10 of 2024.

For entities incorporated on or after 1 March 2024, registration is due within three months of the date of incorporation, establishment, or recognition — not the date you start trading. A company incorporated on 15 January 2026 has a registration deadline of 15 April 2026. For resident individuals who crossed the AED 1 million turnover threshold during 2025, the registration deadline is 31 March 2026.

The 7-month waiver

Since April 2025, the FTA waives the AED 10,000 late-registration penalty if you file your first Corporate Tax return (or annual declaration) within seven months of the end of your first tax period — rather than the usual nine. If you registered late, filing early is the way to have the fine waived or credited back.

Filing and payment: one return, nine months

You must file an annual Corporate Tax return within nine months of the end of your tax period. For a financial year ending 31 December 2025, that means the return and any payment are due by 30 September 2026. You file even if your taxable income is zero, and even if you are a QFZP claiming 0% — there is one return per year, per entity.

Penalties for missing these are separate from, and stack on top of, the registration penalty. Late filing carries AED 500 per month for the first year, rising to AED 1,000 per month thereafter. On late payment, note an important 2026 change: Cabinet Decision No. 129 of 2025, effective 14 April 2026, set the late-payment penalty at a flat 14% per annum on the unpaid amount, calculated from the day after the due date. A lot of older online guidance still quotes the previous structure — this is the current one.

The practical takeaway

The 9% rate is rarely the thing that hurts an SME — many never cross AED 375,000 of taxable income, and many qualify for Small Business Relief. What hurts is missing a deadline you didn’t know existed: the AED 10,000 registration fine that applies even when no tax is owed, or a QFZP breach that locks in 9% for five years.

The defence is simple: know your registration deadline, elect Small Business Relief if you qualify, file on time even at zero, and keep clean books so your taxable income is calculated correctly. Software that tracks your obligations and computes CT directly from your recorded invoices and expenses removes most of the risk — which is exactly what Deskloc Flow is built to do for UAE businesses.

Note: This article is general information, not tax or legal advice. UAE tax rules and deadlines change — always confirm current requirements with a qualified UAE tax advisor or the FTA before acting.

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