UAE Corporate Tax Explained for Small Businesses (2026)
UAE corporate tax is charged at 9% on taxable profit above AED 375,000, and 0% on the portion at or below AED 375,000. Even if your business owes nothing because it sits under that threshold, registration with the Federal Tax Authority and filing an annual corporate tax return are still mandatory. For most small businesses and founders in Dubai and across the Emirates, that single sentence captures the headline - but the details around registration, Small Business Relief, free zone treatment and filing deadlines are where compliance is won or lost.
This guide explains how the UAE corporate tax regime works in practical terms for owner-managed companies, start-ups and SMEs. It is a general explanation of the rules as currently legislated, not individualized tax advice. For your specific situation, confirm with the FTA or a qualified tax advisor. If you want hands-on help, see our corporate tax service.
What is UAE corporate tax?
UAE corporate tax is a federal tax on the net profit of businesses, introduced under Federal Decree-Law No. 47 of 2022. It applies to financial years starting on or after 1 June 2023. The tax is administered by the Federal Tax Authority (FTA), the same body that runs VAT.
The standard regime is deliberately simple compared with corporate tax systems in many other countries:
- 0% on taxable profit up to and including AED 375,000.
- 9% on taxable profit above AED 375,000.
- A separate, higher top-up rate applies only to very large multinational groups (more on Pillar Two below).
Corporate tax is charged on profit, not on revenue or turnover. A company can have millions in sales and still owe little or nothing if its costs are high and its net profit is modest. This is different from VAT, which is a 5% tax on consumption collected on most goods and services. The two taxes are entirely separate systems with separate registrations - see our explainer on VAT registration in the UAE and who needs it.
Who has to pay (and who is exempt)?
Corporate tax applies broadly to businesses operating in the UAE. The main categories of taxable persons are:
- Juridical persons - LLCs, private and public joint stock companies, and other entities incorporated in the UAE, including most free zone companies.
- Foreign juridical persons that are effectively managed and controlled in the UAE, or that have a permanent establishment here.
- Natural persons (individuals) conducting a business or business activity in the UAE, where their total annual turnover from such activity exceeds AED 1 million. Salaries, personal investment income and real estate investment income held in a personal capacity are generally outside the scope.
Certain exempt persons sit outside the regime, subject to conditions. These typically include government entities and government-controlled entities, qualifying public benefit entities, qualifying investment funds, and certain pension and social security funds. Exemption is not automatic in every case - some categories require an application to or notification of the FTA.
Rule of thumb: if you run a normal commercial company in the UAE - mainland or free zone - assume you are in scope for corporate tax and must register, then look at whether reliefs or a 0% outcome apply.
Registration and your Tax Registration Number
Registration is the step most small businesses underestimate. Corporate tax registration is mandatory, and it applies even to businesses that expect to pay 0% because their profit is below AED 375,000 or because they qualify for relief.
You register through the FTA's EmaraTax portal. On approval, your business is issued a Tax Registration Number (TRN) for corporate tax. Practical points:
- Registration is done online via EmaraTax, the same platform used for VAT.
- The FTA has set registration deadlines that depend on the month your licence was issued (for existing businesses) or your date of incorporation. Missing the applicable deadline can trigger an administrative penalty.
- A corporate tax TRN is distinct from a VAT TRN. Having one does not mean you are registered for the other.
Because deadlines are tied to licence and incorporation dates, the safest approach is to confirm your specific registration deadline early rather than assume you have time. Our team handles this end to end through VAT and tax registration.
From accounting profit to taxable profit
Corporate tax is calculated on taxable income (often called taxable profit), which starts from your accounting net profit shown in financial statements prepared under accepted accounting standards (generally IFRS, or IFRS for SMEs for smaller entities).
That accounting net profit is then adjusted for tax purposes. Common adjustments include:
- Adding back expenses that are not deductible or only partly deductible (for example, certain entertainment costs and specific fines or penalties).
- Removing income that is exempt from corporate tax (such as qualifying dividends and qualifying capital gains under the participation rules).
- Applying interest deduction limitation rules where relevant.
- Making transfer pricing adjustments on transactions with related parties and connected persons, so they reflect arm's length pricing.
The 0% / 9% rates then apply to this adjusted figure - the taxable profit - not to the raw accounting number. Keeping clean books is therefore not optional: it is the foundation of the entire calculation. If your bookkeeping is informal, that is the first thing to fix; our accounting service exists precisely for this.
The rate bands and a worked example
The tax is structured as a simple two-band system on taxable profit:
| Portion of taxable profit | Corporate tax rate |
|---|---|
| Up to and including AED 375,000 | 0% |
| Above AED 375,000 | 9% |
| Large multinational groups (in scope of the global minimum tax) | Effective minimum top-up to 15% (separate regime) |
Here is a simple worked example. Suppose a Dubai mainland trading company has a taxable profit of AED 600,000 for the year and does not elect Small Business Relief:
- First AED 375,000 is taxed at 0% → AED 0.
- Remaining AED 225,000 (600,000 - 375,000) is taxed at 9% → AED 20,250.
- Total corporate tax due: AED 20,250.
Note that the effective rate on the whole AED 600,000 is only about 3.4%, because the first AED 375,000 always benefits from the 0% band. A second example: a start-up with a taxable profit of AED 300,000 pays AED 0, because the entire amount sits within the 0% band - but it must still register and file.
Small Business Relief
To ease the burden on genuinely small businesses, the regime offers Small Business Relief. Where a business elects for it and meets the conditions, it is treated as having no taxable income for the period and benefits from simplified compliance obligations.
Key features, subject to conditions and as currently legislated:
- Relief is available where the business's revenue in the relevant tax period - and in all previous tax periods - stays within the threshold set by the Ministry of Finance. As currently legislated, that threshold is AED 3 million, but you should confirm the current figure with the FTA or your advisor.
- It is an election: you must claim it in your corporate tax return for each period. It is not applied automatically.
- If revenue exceeds the threshold in any period, the relief is lost for that period and for subsequent periods.
- Small Business Relief is not available to a Qualifying Free Zone Person or to members of a multinational enterprise group.
There is an important sunset to be aware of. As currently legislated, the AED 3 million revenue threshold is set to apply only to tax periods ending on or before 31 December 2026. Whether it is extended, changed or allowed to expire is a policy decision for the Ministry of Finance - so treat the relief as time-limited and verify its status with the FTA or a tax advisor before relying on it for a future year.
Even when Small Business Relief applies and your tax is nil, you generally still register, and you still file a return claiming the relief. Relief simplifies obligations; it does not remove them.
Free zone companies: the Qualifying Free Zone Person regime
Free zones remain attractive, but the corporate tax treatment is more nuanced than the popular "0% forever" headline. A free zone company can potentially benefit from a 0% rate on its qualifying income if it is a Qualifying Free Zone Person (QFZP) - but only if it meets all the conditions.
To be a QFZP, a free zone entity must, broadly:
- Maintain adequate substance in the UAE (real people, premises and activity).
- Derive qualifying income as defined in the relevant decisions.
- Not have elected to be taxed under the standard regime.
- Comply with transfer pricing rules and maintain the required documentation.
- Satisfy de minimis requirements - meaning non-qualifying revenue must stay below a small permitted limit (broadly the lower of 5% of total revenue or AED 5 million).
- Prepare audited financial statements.
The treatment differs sharply from a mainland company:
| Aspect | Mainland company | Qualifying Free Zone Person |
|---|---|---|
| Rate on qualifying income | 0% up to AED 375,000, then 9% | 0% on qualifying income |
| Rate on non-qualifying income | Same standard bands | 9% (and exceeding de minimis can cost QFZP status entirely) |
| Small Business Relief | Available (subject to conditions) | Not available |
| Audited financial statements | Required above certain thresholds | Required to maintain QFZP status |
If you breach the de minimis limit or fail another condition, you can lose QFZP status and be taxed under the standard regime - potentially for multiple years. Choosing between mainland and free zone is a strategic decision with tax, cost and operational dimensions; see our detailed mainland vs free zone company setup comparison.
Filing, deadlines and recordkeeping
Corporate tax is self-assessed. You are responsible for calculating your liability, filing on time and keeping evidence to support the figures.
- One annual return. A single corporate tax return is filed for each tax period through EmaraTax. There are no provisional or advance filings in the standard regime.
- Deadline. The return must be filed - and any tax paid - within nine months after the end of the relevant tax period. For a financial year ending 31 December, that means a deadline of 30 September the following year.
- Records. Keep financial statements and supporting records for the period required by law (generally seven years). Transfer pricing documentation may be required where related-party transactions exceed certain thresholds.
A realistic compliance calendar for a typical small company looks like this:
- Register for corporate tax and obtain a TRN (by your specific deadline).
- Maintain accurate bookkeeping throughout the year.
- Close the books and prepare financial statements after year-end.
- Compute taxable profit, decide on any elections (such as Small Business Relief), file the return and pay within nine months.
Penalties and the multinational top-up tax
The FTA can impose administrative penalties for non-compliance. Common triggers include late registration, late filing of the return, late payment, and failure to keep adequate records. Penalties apply regardless of whether tax is actually owed - so a business sitting comfortably under the AED 375,000 threshold can still be penalized purely for filing late or not registering.
Separately, large multinational groups face an additional layer under the OECD's Pillar Two framework. The UAE has introduced a Domestic Minimum Top-up Tax (DMTT) aimed at ensuring that in-scope multinational enterprise groups - broadly those with consolidated global revenues of at least EUR 750 million - pay an effective tax rate of at least 15% in the UAE. This is a separate regime from the standard 9% corporate tax and does not affect ordinary small businesses, which remain on the 0% / 9% bands.
Frequently Asked Questions
Do I have to register if my profit is below AED 375,000?
Yes. Corporate tax registration is mandatory for taxable persons even if your profit falls entirely within the 0% band and you owe nothing. You also generally still file an annual return. Skipping registration can lead to administrative penalties.
What is the UAE corporate tax rate?
The standard rate is 0% on taxable profit up to and including AED 375,000, and 9% on taxable profit above that. A separate minimum top-up regime applies only to very large multinational groups under Pillar Two.
Is corporate tax the same as VAT?
No. VAT is a 5% tax on most goods and services and is collected on sales. Corporate tax is 9% on business net profit above the threshold. They are separate systems with separate registrations and separate returns.
What is Small Business Relief and is it still available?
Small Business Relief lets eligible small businesses elect to be treated as having no taxable income, with simplified compliance, subject to conditions including a revenue threshold (as currently legislated, AED 3 million). As currently legislated this threshold applies to tax periods ending on or before 31 December 2026. Because it is time-limited and may change, confirm its current status with the FTA or a tax advisor.
Do free zone companies pay 0%?
Only if they qualify as a Qualifying Free Zone Person and meet all conditions - including adequate substance, qualifying income, de minimis limits and transfer pricing compliance. Non-qualifying income is taxed at 9%, and breaching the conditions can cause loss of QFZP status.
When is the corporate tax return due?
The annual corporate tax return must be filed and any tax paid within nine months after the end of the tax period. For a calendar-year business, that is 30 September of the following year.
Conclusion
For most UAE small businesses, corporate tax is manageable: 0% on the first AED 375,000 of taxable profit, 9% above it, and a clear annual filing obligation. The risk is rarely the tax bill itself - it is missing the mandatory registration, filing late, misjudging free zone conditions, or relying on Small Business Relief without confirming it still applies. Each of those is avoidable with clean bookkeeping and a clear compliance calendar.
If you want this handled correctly from registration through to your first return, our specialists can manage it for you. Start with our UAE corporate tax service, and if you are still deciding on structure or budgeting your launch, read our breakdown of the cost to set up a company in Dubai in 2026.
This article is general information about UAE corporate tax as currently legislated and is not tax, legal or financial advice. Tax rules, thresholds and reliefs can change, and their application depends on your specific circumstances. Always confirm the current position with the Federal Tax Authority or a qualified tax advisor before acting.
