The UAE introduced a 9% federal corporate tax effective for financial years starting on or after 1 June 2023 — ending the country’s long-standing status as a zero-tax jurisdiction. Understanding who pays, what is exempt and how to comply is now essential for every business in the Emirates.
The 9% Rate and the AED 375,000 Threshold
The headline rate is 9% on taxable profits — one of the lowest in the world. Crucially, profits up to AED 375,000 are taxed at 0%, protecting small businesses and startups. Only profits above that threshold are subject to the 9% rate.
Free Zone Businesses: The 0% Rule
Free zone companies can still pay 0% — but only on “qualifying income”. To benefit, a free zone business must meet the qualifying income criteria, maintain adequate substance in the UAE, and not elect to be taxed normally. Income from mainland activities generally does not qualify, so it is vital to review your structure with a tax adviser.
Who Is Exempt?
Certain entities are exempt, including government entities, extractive and natural-resource businesses already taxed at the emirate level, and qualifying investment funds. Small business relief is also available for businesses with revenue below AED 3 million in certain cases.
Registration and Compliance
Every taxable business must register with the Federal Tax Authority (FTA) and obtain a Tax Registration Number. Companies must file a corporate tax return within nine months of their financial year-end and maintain proper accounting records. Transfer pricing documentation applies to businesses with related-party transactions above set thresholds.
Practical Steps for 2026
- Confirm your registration status and deadlines with the FTA.
- Determine whether free zone 0% treatment applies to your income.
- Implement proper bookkeeping and transfer pricing documentation.
- Engage a UAE tax adviser to optimise your structure before year-end.
Conclusion
The UAE corporate tax is designed to be business-friendly, but compliance is now mandatory. With a 9% rate, a generous zero-rate band and free zone relief, the UAE remains highly competitive — provided businesses plan and document properly.