UAE corporate tax is the federal tax on business profits, applying to financial years that began on or after 1 June 2023. The headline mechanics are deliberately simple — 0% on taxable income up to AED 375,000 and 9% above it — but scope, free zone treatment and filing discipline each carry detail worth understanding from the outset. This explainer covers the essentials for anyone meeting the regime for the first time.
A Profits Tax, Not a Transaction Tax
Corporate tax is charged on taxable income — broadly, the accounting profit for the financial year, adjusted as the law prescribes. That distinguishes it from VAT, which taxes individual supplies at 5% regardless of whether the business is profitable. The two regimes run in parallel, are registered for separately and are administered by the Federal Tax Authority through the EmaraTax portal. The UAE also applies a 0% withholding tax, so cross-border payments such as dividends, interest and royalties leave the country without tax deducted at source.
Who Is in Scope
The regime reaches further than incorporated companies. Mainland companies, free zone entities and branches of foreign companies are all taxable persons. Foreign companies without a UAE entity can be drawn in where they have a permanent establishment here or earn UAE-sourced income. Natural persons — sole proprietors, freelancers and other licensed individuals — fall within scope only where turnover from business activity exceeds AED 1 million in a calendar year; wages, personal investment returns and personal real estate income stay outside the net regardless of size.
The Rates
Taxable income up to AED 375,000 is taxed at 0%, and everything above that at 9%. The threshold is a band, not an eligibility test: a company with AED 500,000 of taxable income pays 9% only on the AED 125,000 above the line. Separately, large multinational groups with global revenue of EUR 750 million or more fall within the UAE’s domestic minimum top-up tax, which applies a 15% minimum rate for financial years starting on or after 1 January 2025. For everyone else, 9% remains the ceiling.
How Taxable Income Is Worked Out
The starting point is the profit shown in financial statements prepared under acceptable accounting standards. The law then adjusts: exempt income (such as qualifying dividends) comes out, non-deductible costs (such as fines or a portion of client entertainment) go back in, and related-party transactions must be priced on arm’s-length terms. Reliefs sit on top — including a temporary small business relief, electable only for tax periods ending on or before 31 December 2026, and a participation exemption for qualifying shareholdings. Each relief has its own conditions, and most must be claimed in the return rather than assumed.
Free Zones in One Paragraph
Free zone companies are inside the regime, not outside it. A free zone entity that meets the conditions to be a qualifying free zone person pays 0% on its qualifying income and 9% on the rest; an entity that fails the conditions pays the standard rates on everything. The qualifying tests — substance, qualifying activities, de minimis limits and audited financial statements — are detailed enough to deserve their own analysis, and a fuller picture of the corporate tax and VAT compliance cycle they sit inside is on our UAE taxation page.
Registration, Filing and Records
Every taxable person registers for corporate tax on EmaraTax — including businesses expecting to pay nothing. The return is filed, and any tax paid, within nine months of the end of the financial year, so a 31 December 2025 year-end means a 30 September 2026 deadline. Records supporting the return must be kept for seven years. Late registration, filing or payment each attract administrative penalties, which is why the regime is best treated as an annual discipline rather than a one-off registration exercise.
Where to Go Next
If a specific scenario is on your mind — group structures, losses, foreign income, individual licences — the question-and-answer format of our UAE corporate tax FAQ is the quickest route in. For businesses still choosing a legal form, the tax treatment is one variable alongside licensing and ownership, which is where company formation decisions intersect with the tax rules.
Frequently Asked Questions
When did UAE corporate tax take effect?
UAE corporate tax applies to financial years beginning on or after 1 June 2023. A company with a calendar-year financial year has been within the regime since 1 January 2024 and is now in a recurring annual filing cycle.
What rate of corporate tax does the UAE charge?
0% on taxable income up to AED 375,000 and 9% above it. A 15% domestic minimum top-up tax applies only to multinational groups with global revenue of EUR 750 million or more, for financial years starting on or after 1 January 2025.
Do individuals and freelancers pay UAE corporate tax?
Only where turnover from licensed business activity exceeds AED 1 million in a calendar year. Employment income, personal investments and personal real estate income are outside the regime irrespective of amount.
Do free zone companies pay corporate tax?
Free zone companies are within the regime. Qualifying free zone persons pay 0% on qualifying income and 9% on non-qualifying income; free zone entities that fail the conditions pay the standard rates on all taxable income.
Is there withholding tax in the UAE?
Withholding tax applies at a 0% rate, so dividends, interest, royalties and similar cross-border payments are not taxed at source. Corporate tax is collected through annual self-assessed returns instead.