UAE Corporate Tax: The Basics
The UAE Federal Corporate Tax applies to financial years starting on or after 1 June 2023. The rate is 9% on taxable income exceeding AED 375,000. Income up to AED 375,000 is taxed at 0%. This threshold effectively protects almost all micro and small businesses.
Who Must Register
All UAE businesses — mainland and free zone — must register for corporate tax with the Federal Tax Authority (FTA) regardless of whether they expect to owe tax. Failure to register carries administrative penalties. Registration is done through the EmaraTax portal.
The AED 375,000 Threshold in Practice
If your annual net profit is below AED 375,000, your tax liability is zero — but you must still register, maintain records, and file a return. The threshold applies to each legal entity separately, not to a business group as a whole.
Free Zone Companies
Free zone entities can qualify for a 0% corporate tax rate on "qualifying income" — broadly, income from transactions with other free zone entities, income from qualifying activities specified by the Ministry of Finance, and certain income from international sources.
Critically, free zone entities that earn "non-qualifying income" (e.g., sales to mainland UAE customers above a de minimis threshold) will lose the 0% benefit on their entire income for that tax period, not just the non-qualifying portion. This is a trap for free zone businesses that also sell domestically.
Exempt Income
Dividends and capital gains from qualifying shareholdings are generally exempt. Income of qualifying public benefit entities, government entities, and certain investment funds is also exempt.
Small Business Relief
Businesses with revenue not exceeding AED 3 million can elect for "Small Business Relief" — they are treated as having zero taxable income and pay no tax. This election is available for tax periods ending on or before 31 December 2026. It is a temporary simplification measure intended to ease the transition to corporate tax for micro-businesses.
Record-Keeping Requirements
All businesses must maintain financial records and supporting documents for 7 years. Records must be in Arabic or accompanied by an Arabic translation if requested by the FTA. Your POS system's transaction history, purchase records, and payroll data form the foundation of these records.
