The introduction of corporate tax in the UAE marked a major shift in the country’s business framework. For decades, the UAE was known as a tax-free jurisdiction. That changed with the implementation of federal corporate tax.
As of today, corporate tax in UAE is no longer optional, and misunderstanding the rules can result in heavy penalties.
This guide explains everything business owners must know about UAE corporate tax in 2025–2026 including tax rates, exemptions, free zone treatment, registration deadlines, penalties, and compliance requirements.
What Is Corporate Tax in UAE?
Corporate tax is a direct tax imposed on the net profits of businesses operating in the UAE.
The UAE corporate tax regime came into effect from:
1 June 2023
All businesses earning income in the UAE fall under the Federal Tax Authority (FTA), regardless of whether they are mainland or free zone entities.
UAE Corporate Tax Rate Structure
The UAE follows a tiered corporate tax system:
| Taxable Profit | Corporate Tax Rate |
|---|---|
| Up to AED 375,000 | 0 percent |
| Above AED 375,000 | 9 percent |
This structure is designed to support startups and small businesses while aligning the UAE with international tax standards.
Who Must Register for Corporate Tax in UAE?
Corporate tax registration is mandatory for:
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Mainland companies
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Free zone companies
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Branch offices
-
Foreign companies with UAE income
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Freelancers holding professional licenses
Even if your business earns zero revenue, registration is compulsory.
Failure to register results in penalties.
Corporate Tax Registration Deadline
Registration deadlines vary based on:
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License issuance date
-
Legal structure
-
Financial year
Missing the deadline triggers an automatic:
AED 10,000 penalty
This penalty is issued even if your business has no tax liability.
Who Is Exempt from UAE Corporate Tax?
Some entities are exempt, but exemption is not automatic.
Exempt categories include:
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Government entities
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Government-owned entities
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Public pension funds
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Qualifying investment funds
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Certain nonprofit organizations
Exempt entities must still apply for exemption approval with the FTA.
Corporate Tax for Free Zone Companies
This is the most misunderstood area.
Free zone companies can enjoy 0 percent corporate tax only if:
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They qualify as a Qualifying Free Zone Person (QFZP)
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They maintain adequate substance
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They earn qualifying income
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They comply with transfer pricing rules
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They file annual corporate tax returns
If any condition is violated, the company becomes taxable at 9 percent.
What Is Qualifying Income?
Qualifying income includes:
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Transactions between free zone entities
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Export of goods and services outside UAE
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Approved activities listed by the Ministry of Finance
Income earned from the UAE mainland is usually non-qualifying.
Mainland Companies and Corporate Tax
Mainland companies are subject to:
-
0 percent tax up to AED 375,000 profit
-
9 percent tax above threshold
There are no special exemptions for mainland companies except small business relief.
Small Business Relief (SBR)
The UAE introduced Small Business Relief to support startups.
Eligible if:
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Annual revenue does not exceed AED 3 million
-
Business is not part of a multinational group
When approved, taxable income is treated as zero.
This relief is currently available until 31 December 2026.
Corporate Tax Calculation Example
Example:
Annual net profit: AED 500,000
-
First AED 375,000 → 0 percent tax
-
Remaining AED 125,000 → 9 percent tax
Corporate tax payable:
AED 11,250
Corporate Tax Return Filing
All companies must:
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Maintain accounting records
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Prepare financial statements
-
File corporate tax returns annually
Filing timeline:
Within 9 months from end of financial year.
Late filing leads to penalties.
Corporate Tax Penalties in UAE
Common penalties include:
| Violation | Penalty |
|---|---|
| Failure to register | AED 10,000 |
| Late tax return filing | AED 500 to AED 1,000 per month |
| Incorrect declaration | Up to 300 percent of tax |
| Failure to maintain records | AED 10,000 |
Penalties accumulate quickly and cannot be ignored.
Transfer Pricing Regulations
Businesses must follow transfer pricing rules if they:
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Deal with related parties
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Have cross-border transactions
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Are part of group structures
Documentation may include:
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Local file
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Master file
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Transfer pricing disclosure
Accounting Records Requirement
Companies must maintain:
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Income statements
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Balance sheets
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Expense records
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Bank statements
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Supporting invoices
Records must be retained for 7 years.
Difference Between VAT and Corporate Tax
| VAT | Corporate Tax |
|---|---|
| Indirect tax | Direct tax |
| Charged on sales | Charged on profit |
| 5 percent | 9 percent |
| Monthly/quarterly filing | Annual filing |
Both operate independently.
Corporate Tax Impact on Business Setup in Dubai
Corporate tax has not reduced Dubai’s attractiveness.
Why?
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Lowest tax rate globally at 9 percent
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0 percent threshold up to AED 375,000
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Extensive double taxation treaties
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Strong banking and compliance framework
Dubai remains one of the most tax-efficient jurisdictions worldwide.
Why Professional Corporate Tax Support Matters
Corporate tax compliance is not just registration.
It includes:
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Correct classification
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Financial statement preparation
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Exemption analysis
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Free zone eligibility review
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Return filing
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Audit readiness
Errors can lead to penalties far exceeding consulting costs.
How StratEdge Advisors Can Help
StratEdge Advisors provides end-to-end corporate tax support including:
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Corporate tax registration
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Free zone eligibility assessment
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Small business relief evaluation
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Tax calculation and planning
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Corporate tax return filing
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Ongoing compliance support
We ensure your business stays compliant without overpaying tax.
Contact us
Frequently Asked Questions
Is corporate tax mandatory in UAE?
Yes. All businesses must register even if profit is zero.
Do free zone companies pay corporate tax?
Only if they fail to meet qualifying free zone conditions.
What is the corporate tax rate in UAE?
0 percent up to AED 375,000 profit and 9 percent above.
Is corporate tax applicable to freelancers?
Yes, if operating under a commercial or professional license.
What happens if I don’t register?
AED 10,000 penalty is imposed automatically.
Is audit mandatory?
Not mandatory, but proper financial statements are required.
Can losses be carried forward?
Yes, subject to FTA conditions.