How does UAE corporate tax work?
UAE corporate tax is a federal tax on business profits: 0% on taxable income up to AED 375,000 and 9% on the amount above it. It is set by Federal Decree-Law No. 47 of 2022 and applies to financial years starting on or after 1 June 2023. The Federal Tax Authority (FTA) runs registration, returns and payments on its EmaraTax platform.
The tax is self-assessed yearly, starting from the net profit in your financial statements. It applies in all seven emirates, alongside VAT (see VAT registration in the UAE).
| Taxpayer or income | Rate |
|---|---|
| Taxable income up to AED 375,000 | 0% |
| Taxable income above AED 375,000 | 9% |
| Qualifying Free Zone Person: qualifying income | 0% |
| Qualifying Free Zone Person: other taxable income | 9% |
| Small Business Relief (revenue up to AED 3 million, if elected) | Treated as having no taxable income |
| UAE-source income of a non-resident with no UAE permanent establishment | 0% withholding tax |
| Members of multinational groups with global revenue of EUR 750 million or more | Top-up to a 15% effective rate |
Who must register and pay UAE corporate tax?
Every taxable person must register, including free zone companies and businesses that expect to owe nothing. A profit below AED 375,000 is not an exemption: it is simply taxed at 0%, and a return is still due.
Taxable persons are:
- Companies set up in the UAE, on the mainland or in a free zone
- Foreign companies effectively managed and controlled in the UAE
- Individuals whose business turnover in the UAE exceeds AED 1 million in a calendar year (Cabinet Decision No. 49 of 2023); wages, personal investment income and real estate investment income do not count
- Non-resident companies with a UAE permanent establishment, such as a branch or office, or a nexus through UAE real estate
A non-resident with only UAE-source income and no permanent establishment faces 0% withholding tax and does not register for that income alone.
Who is exempt?
Only listed categories are exempt, and most must meet conditions:
- Government entities, and government controlled entities named in a Cabinet Decision
- Extractive and non-extractive natural resource businesses notified to the Ministry of Finance
- Qualifying public benefit entities listed in a Cabinet Decision
- Qualifying investment funds, pension and social security funds, and certain wholly owned subsidiaries of exempt persons, after FTA approval
A charity or fund is not exempt just because it is licensed. Exempt persons that must register file an annual declaration instead of a return.
When is the corporate tax registration deadline?
A company incorporated in the UAE on or after 1 March 2024, including a free zone company, must apply for corporate tax registration within three months of incorporation. The deadlines come from FTA Decision No. 3 of 2024.
| Taxable person | Registration deadline |
|---|---|
| UAE mainland or free zone company formed on or after 1 March 2024 | 3 months from incorporation |
| Foreign company effectively managed and controlled in the UAE | 3 months from the end of its financial year |
| Non-resident with a UAE permanent establishment | 6 months from when the permanent establishment exists |
| Non-resident with a nexus through UAE immovable property | 3 months from when the nexus is established |
| Resident individual with business turnover above AED 1 million | 31 March of the following calendar year |
| Non-resident individual above the threshold | 3 months from meeting the conditions |
Companies licensed before 1 March 2024 had fixed deadlines in 2024, set by licence month, so one that has not registered is already late.
Registration is free and done online on EmaraTax. The FTA's stated time to process a complete application is 20 business days. A VAT registration does not cover corporate tax: you need a separate Corporate Tax Registration Number.
Late registration penalty and the waiver
Late registration carries a fixed AED 10,000 penalty under Cabinet Decision No. 75 of 2023, as amended by Cabinet Decision No. 10 of 2024. The FTA's waiver initiative cancels it if the business files its first tax return within seven months of the end of its first tax period. A penalty already paid is credited back to the tax account. Exempt persons qualify by filing their first annual declaration on the same timeline. The FTA still listed the initiative in August 2026 but has published no end date, so check the FTA waiver page before relying on it.
When are returns due and what records must you keep?
The corporate tax return must be filed, and the tax paid, within nine months of the end of the tax period. With a 31 December 2025 year end, the deadline was 30 September 2026; with a 31 December 2026 year end, it is 30 September 2027.
The tax period is normally your financial year: the calendar year or the 12-month period of your financial statements.
How taxable income is calculated
Taxable income starts from accounting net profit. Common adjustments:
- Only 50% of entertainment costs for clients, suppliers and shareholders is deductible
- Net interest expense above AED 12 million is capped at 30% of EBITDA
- Payments to owners, directors and their related parties, such as salaries, are deductible only up to market value
- Dividends from UAE companies are exempt, as is income from holdings of 5% or more kept for at least 12 months, if further conditions are met
- Tax losses carry forward, but can reduce a later year's taxable income by no more than 75%
Phase 1 of an R&D tax incentive, announced in March 2026, is designed to give a non-refundable credit of up to 50% on qualifying spending of up to AED 5 million; check the implementing rules before relying on it.
Audits, records and penalties
Under Ministerial Decision No. 84 of 2025, audited financial statements are needed if revenue exceeds AED 50 million, or if the business is a Qualifying Free Zone Person. Records must be kept for seven years after the tax period ends.
| Violation | Administrative penalty |
|---|---|
| Late registration | AED 10,000 |
| Late tax return | AED 500 a month for the first 12 months, then AED 1,000 a month |
| Late payment | 14% a year, charged monthly on the unpaid tax |
| Failure to keep required records | AED 10,000, or AED 20,000 if repeated within 24 months |
How are free zone companies taxed?
A free zone company is a taxable person and must register and file like any other company. It pays 0% only on qualifying income, and only while it remains a Qualifying Free Zone Person (QFZP). Its other taxable income is taxed at 9% from the first dirham: Article 3(2) of the law gives a QFZP no AED 375,000 band at 0%.
To be a QFZP, a free zone person must meet every condition:
- Adequate substance in a free zone: core activities, assets, qualified full-time staff and operating costs there
- Qualifying income, as defined by Cabinet Decision No. 100 of 2023
- No election to be taxed under the standard rules
- Arm's length pricing and transfer pricing documentation
- Non-qualifying revenue of no more than 5% of total revenue or AED 5 million, whichever is lower (the de minimis test)
- Audited financial statements, whatever its revenue
What counts as qualifying income?
Qualifying income is income from free zone persons who are the real recipients of the goods or services, unless the activity is excluded. Income from anyone else qualifies only for qualifying activities, listed in Ministerial Decision No. 229 of 2025:
- Manufacturing and processing of goods or materials
- Trading of qualifying commodities: metals, minerals, industrial chemicals, energy, agricultural and environmental commodities with a quoted price
- Holding shares and other securities for investment
- Owning and operating ships, reinsurance, fund management, and wealth and investment management
- Headquarter services to related parties, and treasury and financing services to related parties or for its own account
- Financing and leasing of aircraft
- Distribution of goods in or from a designated zone, and logistics services
- Activities ancillary to these
Excluded activities include most transactions with individuals, banking, most insurance, finance and leasing, and most real estate income.
Consulting, marketing, IT and other general services are not qualifying activities. Such revenue from mainland or overseas clients counts towards the de minimis limit.
Income from a mainland branch (a domestic permanent establishment) is taxed at 9%. A company that fails any condition loses QFZP status for that tax period and the next four. A QFZP cannot claim Small Business Relief or join a tax group. Compare routes in mainland vs free zone and our UAE free zone guides.
What is Small Business Relief?
Small Business Relief lets a resident business with revenue of AED 3 million or less elect to be treated as having no taxable income for a tax period. Ministerial Decision No. 131 of 2026, issued on 29 July 2026, extended it from tax periods ending by 31 December 2026 to those ending on or before 31 December 2029.
- Revenue must be AED 3 million or less in the current and every earlier tax period. One year above the threshold ends eligibility for later years.
- It is elected for each tax period.
- QFZPs, and members of multinational groups with consolidated revenue above AED 3.15 billion, cannot elect it.
- Other exemptions, reliefs and deductions do not apply while it is used.
- No transfer pricing documentation is needed, but related party prices must still be at arm's length.
- You must still register, file a simplified return within nine months and keep records.
What are the transfer pricing rules?
Transfer pricing rules apply whenever a business deals with related parties or connected persons, on the mainland, in a free zone or abroad. Prices must match what independent parties would agree: the arm's length principle.
- Ministerial Decision No. 97 of 2023 requires a master file and local file if revenue is at least AED 200 million. The same applies to members of groups with consolidated revenue of at least AED 3.15 billion.
- The FTA can require a disclosure of related party transactions with the return, and supporting information within 30 days of a request.
For Indian founders, this covers invoices between the UAE company and a family-owned Indian company, and the founder's own salary.
Worked examples: how much tax will you pay?
A mainland company with AED 920,000 of taxable income pays AED 49,050, while an eligible small business can pay nothing.
| Business | Facts | Corporate tax result |
|---|---|---|
| Mainland trading company, year ending 31 December 2026 | Revenue AED 4.2 million; profit AED 900,000; AED 40,000 entertainment, half added back | Taxable income AED 920,000. 0% on AED 375,000 plus 9% on AED 545,000 = AED 49,050, due by 30 September 2027 |
| Consultancy electing Small Business Relief | Revenue AED 2.4 million, never above AED 3 million | Nil tax; still registers, files a simplified return and keeps records |
| Free zone logistics company (QFZP) | Revenue AED 8 million, of which AED 300,000 non-qualifying | 3.75% and under AED 5 million, so de minimis is met; with no mainland branch or property income, 0% |
| Same company, AED 500,000 non-qualifying | 6.25% of revenue | Fails de minimis; standard rules for this and the next four tax periods |
If the mainland company was incorporated on 15 March 2026, its registration deadline was 15 June 2026. If it missed that, filing its first return by 31 July 2027 brings it within the waiver.
Corporate tax for Indian founders: DTAA, residency and POEM
The main India risk is dual residence: a UAE company run from India can also be treated as resident, and taxed, in India. Under India's Income-tax Act, 2025, in force from 1 April 2026, a company is resident in India for a tax year if its place of effective management (POEM) is in India. That is where key management and commercial decisions for the business as a whole are, in substance, made. A resident company is taxed in India on its worldwide income.
The India-UAE tax treaty (DTAA) was signed on 29 April 1992 and has been in force since 22 September 1993. It treats a company as a UAE resident only if it is incorporated in the UAE and managed and controlled wholly in the UAE. For a company resident in both countries, the treaty looks to its place of effective management.
The FTA's example of a company managed and controlled in the UAE has key decisions made, board meetings held and all board members resident there. POEM turns on facts, so take Indian tax advice before relying on the treaty.
Tax residency certificate
For a UAE company to claim treaty relief on income from India, section 159(8) of the Income-tax Act, 2025 requires a tax residency certificate from the UAE government, plus prescribed documents. The FTA issues UAE certificates through EmaraTax. A company registered for corporate tax pays AED 50 to submit plus AED 500 for an electronic certificate. The FTA's stated processing time is 10 business days.
Dividends and funding
The UAE withholding tax rate is 0%, so dividends paid to an Indian shareholder suffer no UAE tax at source. A shareholder who is resident and ordinarily resident in India is taxed there on foreign income, so the dividend belongs in the Indian return. On payments from India to a UAE resident, the treaty caps Indian tax at 10% on dividends and royalties and 12.5% on interest (5% on bank loans).
Indian residents invest in a UAE company under RBI's Overseas Investment Directions, 2022, through their designated authorised dealer bank. See business setup in Dubai from India for the FEMA steps.
How Ofin helps with UAE corporate tax
Ofin's UAE desk handles corporate tax from registration to the annual return, alongside company formation, VAT and accounting. Ofin Legal has served 5,000+ clients since 2019 and holds a 4.9-star Google rating.
- Checking whether you are a taxable person, your deadline and the right regime: standard, Small Business Relief or QFZP
- Registration with the FTA and the annual return, with accounting and bookkeeping support
- Transfer pricing documentation for related party transactions
- Exemption reviews, penalty reduction requests and corrective filings
- Registration and filing for freelancers and sole proprietors
- Advice on India-UAE tax residence, the DTAA and FEMA rules
We review your financials, agree elections, prepare and file the return, then support compliance through the year. Call or WhatsApp Ofin's UAE desk on +971 50 523 5779.
