UAE Corporate Tax Explained with Worked Examples (2026)
Last checked: 20 October 2026. Every rate, threshold and date below was checked against the Federal Decree-Law, the Cabinet and Ministerial Decisions, and Federal Tax Authority guidance listed at the end of this page.
UAE Corporate Tax is a federal tax on business profit. It is charged under Federal Decree-Law No. 47 of 2022 and administered by the Federal Tax Authority (FTA). This page works the numbers through: from accounting profit to taxable income, to the tax bill, to the due date. It is educational material for exam practice, not tax advice. Check your own position with the FTA or a registered tax agent before you file.
Who pays UAE Corporate Tax, and from when
The law applies to tax periods starting on or after 1 June 2023 (Article 69). A tax period is normally your financial year: either the calendar year or the 12-month period your financial statements cover (Article 57). So the start date depends on your year-end:
- A company with a 1 January to 31 December financial year had its first tax period in calendar 2024.
- A company with a 1 June to 31 May financial year started on 1 June 2023.
Article 11 sets out who is a Taxable Person:
- Resident juridical persons. UAE-incorporated companies, free zone companies included, and foreign companies effectively managed and controlled in the UAE. They are taxed on worldwide income.
- Resident natural persons running a business. Only when total business turnover in a calendar year is more than AED 1 million (Cabinet Decision No. 49 of 2023). Wages, personal investment income and real estate investment income do not count towards that figure.
- Non-residents with a UAE permanent establishment, UAE-sourced income or a nexus set by Cabinet decision.
Article 4 exempts government and government-controlled entities, qualifying extractive businesses, public benefit entities, investment funds and pension funds. Several of these must apply or notify first.
The rates: 0% and 9% (UAE, 2026)
Article 3 sets two rates, and Cabinet Decision No. 116 of 2022 fixes the threshold. The first AED 375,000 of taxable income in a tax period is taxed at 0%; only the part above it is taxed at 9%. It works like a bracket, not a cliff.
| Taxable income in the tax period | UAE Corporate Tax rate (2026) | Tax on that slice |
|---|---|---|
| AED 0 to AED 375,000 | 0% | Nil |
| Above AED 375,000 | 9% | 9% of the excess |
A one-line shortcut gives the same answer for any taxable income above AED 375,000: tax = taxable income × 9% − AED 33,750. The AED 33,750 is 9% of AED 375,000, the slice taxed at nothing.
The 0% band applies once per Taxable Person, however many businesses it runs. Splitting a business artificially to multiply the band can be treated as avoidance under Article 50 (Cabinet Decision No. 116 of 2022).
From accounting profit to taxable income
Start from accounting net profit in standalone financial statements prepared under accepted accounting standards (Article 20), then adjust it. The most common adjustments:
| Item in the accounts | Tax treatment | Article |
|---|---|---|
| Client entertainment (meals, tickets, hospitality) | Only 50% deductible; add back the other 50% | 32 |
| Fines and penalties (not contractual damages) | Not deductible; add back in full | 33(2) |
| Donations to an entity that is not a Qualifying Public Benefit Entity | Not deductible; add back | 33(1) |
| Corporate Tax itself, and recoverable input VAT | Not deductible | 33(6), 33(7) |
| Dividends received from a UAE resident company | Exempt; deduct from profit | 22(1) |
| Tax losses brought forward | Offset, capped at 75% of the year's taxable income | 37 |
Worked example 1: a mainland company, start to finish
A Dubai mainland trading LLC has a calendar-year financial year. It is not in a free zone and does not elect Small Business Relief. For the 2025 tax period its accounts show profit before tax of AED 1,240,000. That figure includes:
- AED 80,000 spent entertaining customers
- AED 15,000 in fines from a licensing authority
- AED 10,000 donated to a charity that is not on the Qualifying Public Benefit Entity list
- AED 120,000 of dividends received from another UAE company
Step 1: adjust the profit.
| Line | AED |
|---|---|
| Profit before tax | 1,240,000 |
| Add back 50% of entertainment (80,000 × 50%) | +40,000 |
| Add back fines | +15,000 |
| Add back non-qualifying donation | +10,000 |
| Deduct exempt UAE dividends | −120,000 |
| Taxable income | 1,185,000 |
Step 2: apply the 2025 UAE rates.
- First AED 375,000 at 0% = AED 0
- Remaining AED 810,000 (1,185,000 − 375,000) at 9% = AED 72,900
- Shortcut check: 1,185,000 × 9% = 106,650; 106,650 − 33,750 = AED 72,900
Step 3: read the result. The marginal rate is 9%, but the effective rate is 72,900 ÷ 1,185,000 = 6.15% of taxable income. The effective vs marginal tax rate guide explains the same idea for US brackets.
Step 4: the deadline. The return and the AED 72,900 are due nine months after the 31 December 2025 year-end, so by 30 September 2026 (Articles 48 and 53).
Small Business Relief: AED 3 million revenue, now to 2029
Article 21 lets a resident Taxable Person elect to be treated as having no taxable income for a tax period. The conditions come from Ministerial Decision No. 73 of 2023:
- Revenue (not profit) of AED 3,000,000 or less in the current tax period and every previous one.
- Who cannot use it: Qualifying Free Zone Persons, and members of large multinational groups as defined in Cabinet Decision No. 44 of 2020.
- Once over, always out. Exceed AED 3 million in any period and you cannot elect again (Article 2(3)).
- Losses are lost. A tax loss from a year in which you elect the relief cannot be carried forward (Article 4).
The end date has moved. Ministerial Decision No. 73 of 2023 originally ended the relief with tax periods ending on or before 31 December 2026. Ministerial Decision No. 131 of 2026, dated 29 July 2026 and announced by the Ministry of Finance on 7 August 2026, extends it to tax periods ending on or before 31 December 2029. The AED 3 million threshold is unchanged. Many pages still give the old 2026 date. The relief is not automatic: you still register and file a return, and make the election in that return.
Worked example 2: should a small consultancy elect the relief?
A Sharjah mainland consultancy has a calendar financial year. Its revenue was AED 2,200,000 in 2024 and AED 2,600,000 in 2025. Its 2025 taxable income is AED 520,000.
| 2025 tax period (UAE) | Without the relief | With the relief |
|---|---|---|
| Taxable income | AED 520,000 | Treated as nil |
| Tax at 0% on first AED 375,000 | AED 0 | — |
| Tax at 9% on AED 145,000 | AED 13,050 | — |
| Corporate Tax payable | AED 13,050 | AED 0 |
Both years are under AED 3 million, so the consultancy can elect and save AED 13,050. Now change two facts:
- A loss year. If 2025 produced a tax loss of AED 180,000 instead, electing would save nothing and forfeit the loss. Not electing keeps it for a later profitable year.
- Growth. If 2026 revenue reaches AED 3,100,000, the relief is gone for 2026 and for 2027, even if revenue drops back to AED 2.5 million.
Worked example 3: the 75% cap on loss relief
A company made a tax loss of AED 900,000 in its 2024 tax period. Its ownership has not changed and it runs the same business, so the continuity conditions in Article 39 are met. In 2025 its taxable income before loss relief is AED 1,000,000.
- Maximum loss it can use: 75% × 1,000,000 = AED 750,000 (Article 37(2))
- Taxable income after loss relief: 1,000,000 − 750,000 = AED 250,000
- Tax: AED 250,000 is inside the 0% band, so AED 0
- Loss carried forward to 2026: 900,000 − 750,000 = AED 150,000
Without the loss, 2025 tax would have been 9% × (1,000,000 − 375,000) = AED 56,250. Notice that AED 125,000 of the loss (375,000 − 250,000) was used against income the 0% band would have covered anyway. Article 37(4) says a carried-forward loss must be set off against the next period's taxable income before any remainder moves on. The company cannot hold the loss back for a later year.
In 2026, with taxable income again at AED 1,000,000, the remaining AED 150,000 is used in full, leaving AED 850,000 taxable and tax of 9% × 475,000 = AED 42,750.
Free zone companies: 0% on qualifying income
A free zone company is a resident like any other. It gets special rates only if it is a Qualifying Free Zone Person (QFZP). Under Article 18, Cabinet Decision No. 100 of 2023 and Ministerial Decision No. 229 of 2025 (which replaced Ministerial Decision No. 265 of 2023), a QFZP must keep adequate substance in the free zone, earn Qualifying Income, not elect into the standard rates, follow the arm's length and transfer pricing documentation rules, prepare audited financial statements, and pass the de minimis test.
Rates for a QFZP (UAE, 2026): 0% on Qualifying Income and 9% on everything else (Article 3(2)). A QFZP does not get the AED 375,000 0% band. FTA guidance on Free Zone Persons says so directly.
Qualifying Income under Article 3 of Cabinet Decision No. 100 of 2023 is:
- income from transactions with other free zone persons that are the beneficial recipients, unless the income comes from Excluded Activities
- income from Qualifying Activities with anyone. The list includes manufacturing, processing, trading of qualifying commodities, logistics, fund and wealth management, headquarter and treasury services to related parties, and distribution in or from a Designated Zone.
- qualifying intellectual property income
- any other income, as long as the de minimis test is met
Some income is always taxed at 9%: income attributable to a mainland branch (a domestic permanent establishment) or a foreign permanent establishment, and most income from immovable property.
The de minimis test: non-qualifying revenue must not exceed 5% of total revenue or AED 5,000,000, whichever is lower (Ministerial Decision No. 229 of 2025, Article 3). Revenue from permanent establishments, most immovable property and non-qualifying intellectual property is left out of both sides of the calculation. If the test is met, the small non-qualifying slice counts as Qualifying Income and is taxed at 0%. If the test is failed, QFZP status is lost from the start of that tax period and for the following four tax periods (Article 5(2)).
Worked example 4: a free zone company that passes, and one that fails
Passing. A free zone logistics company has 2025 revenue of AED 60,000,000: AED 54,200,000 from logistics (a Qualifying Activity), AED 2,800,000 from non-qualifying consulting for mainland customers, and AED 3,000,000 through a mainland branch. Branch revenue is left out of the test, so the de minimis base is AED 57,000,000.
- 5% of 57,000,000 = AED 2,850,000. That is lower than AED 5,000,000, so the limit is AED 2,850,000.
- Non-qualifying revenue of AED 2,800,000 is under the limit, so the test is passed.
- All income outside the branch, the consulting included, is Qualifying Income at 0%.
- Suppose the branch's taxable income is AED 700,000. It is taxed at 9% with no 0% band: AED 63,000.
The margin is only AED 50,000. Wrongly leaving branch revenue in the base would give a limit of AED 3,000,000 and overstate the headroom.
Failing. A larger free zone trader has AED 120,000,000 of revenue for the test, of which AED 5,600,000 is non-qualifying. 5% would be AED 6,000,000, but the AED 5,000,000 cap is lower, so the limit is AED 5,000,000. It fails by AED 600,000. It loses QFZP status for 2025 and the next four tax periods, and is taxed like a mainland company. On taxable income of AED 18,000,000 that means 9% × (18,000,000 − 375,000) = AED 1,586,250 for 2025. For large free zone companies the AED 5 million cap, not the 5%, is the binding limit.
Comparing the three regimes
| Feature (UAE, 2026) | Standard (mainland or non-qualifying) | Small Business Relief | Qualifying Free Zone Person |
|---|---|---|---|
| Rate | 0% to AED 375,000, then 9% | Treated as no taxable income | 0% on Qualifying Income, 9% on the rest |
| Entry test | None | Revenue of AED 3m or less, every period | Substance, audit, de minimis and the other conditions |
| AED 375,000 0% band | Yes | Not relevant | No |
| Time limit | None | Periods ending on or before 31 Dec 2029 | Free zone incentive period |
| Cost of failing | — | Relief lost for good once revenue exceeds AED 3m | Standard rates for that period plus four more |
| Register and file? | Yes | Yes | Yes |
Exempt income: dividends and the participation exemption
Dividends from a UAE resident company are exempt with no further conditions (Article 22(1)). Dividends from a Participating Interest, including one in a foreign company, are exempt under Article 23 if all of these conditions are met:
- you own at least 5% of the shares
- you have held them, or intend to hold them, for at least 12 months without a break
- the company is subject to a corporate-type tax at a rate of at least 9%
- the shares give you at least 5% of distributable profits and of liquidation proceeds
- no more than 50% of the company's assets are interests that would not themselves qualify
Gains on selling a qualifying Participating Interest are also exempt once the 12-month condition is met (Article 23(5)). For tax periods starting on or after 1 January 2025, Ministerial Decision No. 302 of 2024 adds an alternative to the 5% test: a stake with an acquisition cost of AED 4,000,000 or more also qualifies. A dividend from a UAE company, by contrast, needs no minimum stake.
Registration, returns and penalties
| Obligation | Deadline | Source |
|---|---|---|
| Register: UAE company incorporated on or after 1 March 2024 (free zone included) | 3 months from incorporation | FTA Decision No. 3 of 2024 |
| Register: resident natural person with turnover over AED 1m | 31 March of the following year | FTA Decision No. 3 of 2024 |
| Register: non-resident with a UAE permanent establishment (from 1 March 2024) | 6 months from when the PE exists | FTA Decision No. 3 of 2024 |
| File the return | 9 months after the end of the tax period | Article 53 |
| Pay the tax | 9 months after the end of the tax period | Article 48 |
The Corporate Tax penalty schedule is in Cabinet Decision No. 75 of 2023, as amended:
- Late registration: AED 10,000. Cabinet Decision No. 10 of 2024 introduced this from 1 March 2024. Under a waiver announced by the FTA in May 2025, it is waived or refunded if the first return or annual declaration is filed within seven months of the first tax period's end.
- Late return: AED 500 for each month or part month for the first 12 months, then AED 1,000 a month.
- Late payment: 14% per year, charged monthly on the unpaid tax.
The penalty cuts in force from 14 April 2026 (Cabinet Decision No. 129 of 2025) cover VAT and Excise Tax, not this schedule.
How Corporate Tax sits next to VAT
They are separate taxes with separate registrations, both run by the FTA. UAE VAT (Federal Decree-Law No. 8 of 2017) is 5% on supplies, with mandatory registration once taxable supplies and imports exceed AED 375,000 over 12 months (voluntary from AED 187,500). The same AED 375,000 figure means something different in each tax: a sales threshold for VAT registration, and the size of the 0% profit band for Corporate Tax. Input VAT you can recover is not a deductible expense for Corporate Tax (Article 33(7)). To compare another VAT system, try the EU VAT quiz.
Pillar Two: the 15% top-up tax for large groups only
Most businesses can skip this. Cabinet Decision No. 142 of 2024 introduced a top-up tax for fiscal years starting on or after 1 January 2025. It covers UAE entities of multinational groups with consolidated revenue of EUR 750 million or more in at least two of the four preceding fiscal years. Where such a group's effective tax rate in the UAE is below the 15% minimum, the UAE collects the difference. The Ministry of Finance calls this the Domestic Minimum Top-up Tax.
Frequently asked questions
Is the 9% charged on all profit or only above AED 375,000?
Only above it. A company with AED 400,000 of taxable income pays 9% of AED 25,000, which is AED 2,250 (UAE, 2026 rates).
Do I need to register if my profit is below AED 375,000?
Yes, if you are a Taxable Person. The threshold sets the rate, not the duty to register. Late registration carries an AED 10,000 penalty.
When is the first Corporate Tax return due?
Nine months after the tax period ends. For a calendar-year company's first period (2024), that was 30 September 2025.
Do freelancers and sole proprietors pay Corporate Tax?
Only if business turnover is more than AED 1 million in a calendar year. Salary does not count towards that figure. If they are in scope, they can still use Small Business Relief if revenue is AED 3 million or less.
Test yourself
The UAE tax practice quiz drills every rule on this page. For neighbouring topics, try the Saudi tax quiz and the Saudi withholding tax rates guide, OSS vs IOSS vs standard VAT registration, or the US business tax quiz.
Source: Federal Decree-Law No. 47 of 2022 on the Taxation of Corporations and Businesses, as amended by Federal Decree-Laws No. 60 of 2023, No. 40 of 2024 and No. 28 of 2025 (Ministry of Finance English translation); Cabinet Decision No. 116 of 2022 (AED 375,000 threshold); Cabinet Decision No. 49 of 2023 (natural persons); Ministerial Decision No. 73 of 2023 (Small Business Relief) and Ministerial Decision No. 131 of 2026 (extension to 31 December 2029); Cabinet Decision No. 100 of 2023 (Qualifying Income); Ministerial Decision No. 302 of 2024 (participation exemption); Ministerial Decision No. 229 of 2025 (de minimis; repealed Ministerial Decision No. 265 of 2023); FTA Corporate Tax Guide on Free Zone Persons (CTGFZP1); FTA Decision No. 3 of 2024 (registration timelines); Cabinet Decision No. 75 of 2023 as amended by Cabinet Decision No. 10 of 2024 (Corporate Tax penalties); FTA waiver announcement of 7 May 2025; Cabinet Decision No. 142 of 2024 (Top-up Tax); FTA VAT registration guidance under Federal Decree-Law No. 8 of 2017. All checked on 20 October 2026. This page is educational material, not tax advice.