UAE Corporate Tax Explained: Rates, Free Zones and Small Business Relief

Every juridical person incorporated in the UAE, mainland or free zone, is a taxable person and must register. Foreign companies managed and controlled from the UAE are also resident. Natural persons conducting business with turnover above AED 1 million in a calendar year are within scope; employment income, personal investment income and real estate investment income of individuals are not.

Exempt persons include government entities, qualifying public benefit entities, pension funds and certain investment funds, most of which still register.

0 percent on taxable income up to AED 375,000 and 9 percent on the amount above. Taxable income starts from the accounting profit under IFRS and is adjusted for exempt income, disallowed expenses, the interest limitation rule and related-party pricing.

From 1 January 2025 a 15 percent domestic minimum top-up tax applies to multinational groups with consolidated revenue of EUR 750 million or more, implementing the OECD Pillar Two rules. It does not touch owner-managed businesses.

A free-zone company is not automatically at 0 percent. It must be a Qualifying Free Zone Person, which means all of the following in every tax period:

• Adequate substance in the free zone: people, premises and expenditure proportionate to the activity.
• Qualifying income: broadly, income from transactions with other free-zone persons, income from outside the UAE, and income from a list of qualifying activities such as manufacturing, holding shares, logistics and fund management.
• Non-qualifying revenue under the de minimis: the lower of AED 5 million or 5 percent of total revenue.
• Audited financial statements.
• No election to be taxed at the standard rates.

Fail any one and the company is taxed at 9 percent on all its income for that period and the following four. Revenue from mainland UAE customers is the usual problem: it is non-qualifying unless it falls within a listed activity, so a free-zone business that serves local clients needs to watch the de minimis monthly.

A UAE-resident business with revenue of AED 3 million or less in the current tax period and every previous one can elect Small Business Relief, and is then treated as having no taxable income. It still registers and still files a simplified return. The relief is available for tax periods ending on or before 31 December 2026, after which the FTA has indicated it will lapse. Qualifying Free Zone Persons and members of large multinational groups cannot use it.

Registration is on the FTA's EmaraTax portal. The deadline for existing companies depended on the month the licence was issued; new companies register within three months of incorporation. The corporate tax return and payment are due within nine months of the end of the financial year, so a December year end files by 30 September. Records must be kept for seven years.

The law adopts the OECD arm's-length principle for every transaction with a related party or connected person, regardless of size. A transfer pricing disclosure form accompanies the return where related-party transactions exceed AED 40 million. A master file and local file are required for groups with revenue above AED 200 million or for constituent entities of multinational groups with consolidated revenue above AED 3.15 billion. Management fees, intercompany loans and shared services between a UAE company and its UK or US affiliates are exactly what the FTA examines first.

Late registration: AED 10,000. Late filing: AED 500 a month for the first twelve months, AED 1,000 a month thereafter. Late payment: 14 percent a year on the unpaid amount. Failure to keep records: AED 10,000, doubling for repeat. The FTA ran a waiver initiative for late-registration penalties for companies that filed their first return within seven months of their first period end; that window has closed for most.