The UAE’s corporate tax regime has applied to financial years starting on or after 1 June 2023: 9% on taxable profits above AED 375,000, 0% below it, with special regimes for free zones and large multinational groups. These are the questions businesses ask most — updated June 2026, including the approaching end of Small Business Relief.
The Questions, Answered
What is Corporate Tax in the UAE?
A direct federal tax on the net profits of businesses, introduced to align the UAE with international tax standards while keeping the regime competitive. It applies to financial years starting on or after 1 June 2023.
What is the Corporate Tax rate?
9% on taxable income above AED 375,000; 0% on income up to that threshold. Separately, large multinational groups (global revenue of EUR 750 million or more) fall within the UAE's 15% Domestic Minimum Top-up Tax for financial years starting on or after 1 January 2025.
Who is subject to Corporate Tax?
Mainland companies, free zone entities (under their own regime — see below), foreign companies with a permanent establishment in the UAE, and individuals conducting licensed business activity above the threshold. Salaries and personal investment income remain outside the net.
Who is exempt?
Government and qualifying government-controlled entities, qualifying public benefit entities, qualifying investment funds, and extractive or non-extractive natural resource businesses taxed at emirate level — each subject to conditions.
How does Corporate Tax apply to free zone companies?
A Qualifying Free Zone Person can keep a 0% rate on qualifying income; non-qualifying income is taxed at 9%. The status depends on substance, qualifying activities, de minimis limits and transfer pricing compliance — it is earned by meeting conditions, not granted by the licence.
What is Small Business Relief — and when does it end?
Resident businesses with revenue of AED 3 million or less can elect to be treated as having no taxable income for the period. The relief applies only to tax periods ending on or before 31 December 2026, and no extension has been announced — from 2027 the standard regime applies even where revenue stays below AED 3 million, so businesses using the relief should plan the transition now. It is not available to Qualifying Free Zone Persons or members of large multinational groups.
What are the filing requirements?
Every taxable person — including free zone entities — registers with the Federal Tax Authority and files an annual corporate tax return within nine months of the financial year end, with accounting records (audited where required) to support it.
What expenses are deductible?
Expenses incurred wholly and exclusively for the business, with statutory carve-outs: portions of client entertainment, fines and penalties, and costs of earning exempt income among them. Interest deductions carry their own limitation rules.
How are multinational and group structures treated?
UAE-sourced and attributable income is taxable; transfer pricing rules and documentation requirements apply to related-party and connected-person transactions. Groups may form a tax group where ownership and other conditions are met — consolidating returns but tightening documentation.
Does the UAE impose withholding tax?
No — the current withholding rate on domestic and cross-border payments is 0%, one of the regime's most internationally distinctive features. Cross-border structures should still be designed against the treaty network and substance expectations.
Do freelancers and individuals pay Corporate Tax?
Only on licensed business activity, and only where annual taxable profits exceed AED 375,000. Employment income, personal real estate and personal investment returns are outside the scope.
What records must be kept?
Financial statements (audited where applicable), transfer pricing documentation where thresholds are met, invoices and supporting records — retained for at least seven years and producible on FTA review.
What are the penalties for non-compliance?
Administrative penalties attach to late registration, late or inaccurate returns and record-keeping failures, and they escalate with repetition. The reliable mitigation is the unglamorous one: clean books, calendar discipline and positions documented before filing.
How should a business prepare now?
Confirm registration status, map qualifying status (free zone businesses especially), assess related-party transactions against transfer pricing rules, model the post-Small-Business-Relief position for 2027, and assemble the documentation file before the FTA asks for it.
This is the general FAQ in our corporate tax series — companion FAQs cover free zone entities, foreign companies and permanent establishments, SMEs, individual entrepreneurs and UAE-incorporated businesses, alongside our UAE Taxation and UAE Tax Structuring pages.