Executive Summary
Corporate tax is a federal tax that a business pays on its own profit for each tax period. Taxable profit is accounting profit adjusted under the rules of the law: exempt income is taken out of it and non-deductible expenses are added back. All figures in this article are stated as at October 2026.
The UAE corporate tax rate is 0% on the first AED 375,000 of taxable profit in each tax period and 9% on the profit above that amount. Corporate tax is paid by resident companies on the mainland and in free zones, by foreign companies with a permanent establishment in the UAE and by individuals whose business turnover exceeds AED 1,000,000 a year.
Both rates come from the Federal Decree-Law of 2022 on corporate tax, which applies to tax periods starting on or after 1 June 2023. The Ministry of Finance (MoF) issues the decisions that put the law into practice. The Federal Tax Authority (FTA) registers taxpayers, receives returns and collects the tax. Apart from the general band, the law sets four more cases in which no tax is due, and each of them has its own conditions.
What Is the Corporate Tax Rate in the UAE?
A standard taxable person pays 0% on taxable profit up to AED 375,000 and 9% only on the part above it. The 9% never applies to the whole profit. The boundary between the two bands was fixed by a 2022 Cabinet decision.
| Taxable profit in a tax period | Rate | Tax on a profit of AED 500,000 |
|---|---|---|
| Up to and including AED 375,000 | 0% | AED 0 |
| The part above AED 375,000 | 9% | AED 11,250 (9% of AED 125,000) |
A company with AED 500,000 of taxable profit therefore pays AED 11,250, which is 2.25% of its profit. A company with AED 4,000,000 of profit pays 9% on AED 3,625,000, or AED 326,250. It still pays nothing on its first AED 375,000.
The band applies once per taxable person per tax period, however many activities or licences that person holds. A tax period is normally the company's 12-month financial year. No election is needed: every resident company, and every foreign company with a permanent establishment in the UAE, applies the band automatically when it calculates its tax in the return.
Five Cases Where UAE Corporate Tax Is 0%
A business in the UAE pays no corporate tax in five cases: the general band above and four special cases, each with its own conditions. The table compares all five. Each one is explained below.
| Case | Who it covers | Condition for 0% | What happens beyond the condition |
|---|---|---|---|
| General 0% band | Every taxable person | Taxable profit up to AED 375,000 per tax period | 9% on profit above AED 375,000 |
| Qualifying free zone person | A free zone company that meets every condition of the regime | Profit from qualifying income | 9% on profit from other income; if a condition is breached, the regime is lost for five tax periods |
| Small Business Relief | A UAE-resident company or individual | Revenue up to AED 3,000,000 in the current and every earlier period, an election in the return, and a period ending no later than 31 December 2029 | Ordinary 0%/9% rates, permanently once revenue has exceeded AED 3,000,000 |
| Individual's turnover floor | An individual running a business | Business turnover up to AED 1,000,000 in a calendar year | Registration, then 0%/9% on business profit |
| Withholding tax | A foreign company with no permanent establishment or nexus in the UAE that receives UAE-source payments | The rate is set at 0% for any amount | The Cabinet may set a different rate in future |
Qualifying Free Zone Person: 0% on Profit From Qualifying Income
A qualifying free zone person (QFZP) is a company registered in a UAE free zone that meets every condition of the regime. It pays 0% on profit from qualifying income and 9% on profit from all other income. A free zone is a designated area with its own licensing authority, such as DMCC in Dubai or RAKEZ in Ras Al-Khaimah. Being registered in a free zone is not enough on its own. A free zone company that does not qualify pays the ordinary 0%/9% rates.
To keep the status, the company must meet all of these conditions in every tax period:
- it keeps adequate substance in the free zone: staff, premises and spending that match its core income-generating activities;
- it earns qualifying income;
- it has not elected to be taxed under the ordinary rules;
- it prices transactions with related parties at market value and keeps transfer pricing documentation;
- it prepares audited financial statements, whatever its revenue;
- its non-qualifying revenue stays within the de minimis limit.
Qualifying income is income of three kinds. The first is income from transactions with other free zone persons, unless the activity is excluded. The second is income from qualifying activities carried on with customers on the mainland or abroad. The third is income from qualifying intellectual property, such as patents and copyrighted software. Which activities are qualifying is set by a 2025 Ministerial decision. It replaced the 2023 list and applies back to 1 June 2023.
| Qualifying activity | What it covers |
|---|---|
| Manufacturing of goods or materials | Producing, improving or assembling products from raw materials or components |
| Processing of goods or materials | Preparing, treating or converting goods into another form for commercial or industrial use or sale |
| Trading of qualifying commodities | Physical trading of metals, minerals, industrial chemicals, energy, agricultural and environmental commodities (such as carbon credits) that have a quoted price, with related hedging and structured commodity financing; not available where distribution, warehousing, logistics or inventory management bring 51% or more of revenue |
| Holding of shares and other securities | Shares and other securities held for investment for at least 12 months without interruption |
| Ownership, management and operation of ships | Ships used in international transport of passengers, goods or livestock, towing, dredging and bareboat chartering; not local transport, leisure or floating hotels |
| Reinsurance services | Reinsurance regulated under UAE insurance law |
| Fund management services | Managing an investment fund under the oversight of a UAE financial regulator |
| Wealth and investment management services | Investment management and advisory services under the oversight of a UAE financial regulator |
| Headquarter services to related parties | Senior management, administration, procurement, planning, risk management and coordination for group companies |
| Treasury and financing services | Cash and liquidity management, financing and financial risk management for related parties or on the company's own account |
| Financing and leasing of aircraft | Financing and leasing of aircraft, engines and rotable components, including related advisory services |
| Distribution in or from a designated zone | Buying and selling goods through a designated zone to customers who resell or process them, or to public benefit entities |
| Logistics services | Storage and transport of other people's goods: cargo handling, warehousing, freight forwarding, customs brokerage |
| Ancillary activities | Activities needed to carry on any of the activities above, or so closely linked to them that they are not a separate activity |
The same decision lists excluded activities. Income from these never counts as qualifying income:
- Transactions with individuals. Sales to natural persons are excluded. The exceptions are ships, fund management, wealth management and aircraft leasing.
- Banking. Regulated banking activities are excluded.
- Insurance. Insurance is excluded, except reinsurance and captive insurance provided as part of headquarter services.
- Regulated finance and leasing. These are excluded, except commodity financing, ship leasing, treasury services and aircraft leasing.
- Immovable property. Owning or exploiting real estate is excluded. The only exception is commercial property in a free zone let to another free zone person.
The de minimis limit is the amount of non-qualifying revenue a QFZP may earn without losing the regime: no more than 5% of total revenue or AED 5,000,000, whichever is lower. For example, a company with AED 20,000,000 of revenue may earn up to AED 1,000,000 of non-qualifying revenue. A company with AED 150,000,000 of revenue is capped at AED 5,000,000, because 5% of its revenue would be AED 7,500,000.
If any condition is breached at any time, the company loses the status from the start of that tax period and for the following four. For those five periods, all of its taxable profit is taxed at the ordinary 0%/9% rates, not only the non-qualifying part.
Small Business Relief: 0% for Revenue Up to AED 3,000,000 Until 2029
Small Business Relief is a relief that treats an eligible UAE-resident business as having no taxable profit for a tax period, so no corporate tax is calculated or paid. It is open to a resident company or individual whose revenue is no more than AED 3,000,000 in the current tax period and in every earlier one. Revenue means gross income: sales plus any other income, including the proceeds from selling an asset. It is not profit. A business with AED 2,800,000 of revenue and AED 800,000 of profit would otherwise pay AED 38,250. With the relief, it pays nothing.
The relief was first available only for tax periods ending on or before 31 December 2026. A 2026 Ministerial decision, published by the MoF in August 2026, extended it to tax periods ending on or before 31 December 2029. The AED 3,000,000 threshold and the list of excluded businesses did not change.
Three groups cannot use the relief at all:
- Qualifying free zone persons. They already pay 0% on qualifying income. A free zone company that is not a QFZP can still elect the relief.
- Members of large multinational groups. A company in a group with consolidated revenue of at least AED 3.15 billion, which must file country-by-country reports, cannot elect it.
- Foreign companies. A UAE branch of a foreign company is generally not a resident, so it cannot elect the relief. The exception is a branch protected by a non-discrimination clause in a double tax treaty.
The relief is not automatic. The business registers for corporate tax, files a return for each period and ticks the election in that return. In exchange, it files a simplified return and may keep its accounts on a cash basis.
Small Business Relief and Tax Losses
A business that elects Small Business Relief for a tax period loses any tax loss made in that period for good. A tax loss is negative taxable profit. In an ordinary year it is carried forward and set against up to 75% of taxable profit in later years. In a relief year it cannot be carried forward at all. The same rule applies to net interest expenditure.
Losses from earlier years in which the relief was not elected are kept. They can be used in a later year in which the business files an ordinary return. The relief also switches off asset transfers at book value within a qualifying group and business restructuring relief. Transfer pricing documentation is not required in a relief year, but transactions with related parties must still be at market prices.
An example shows what this costs. A company with AED 2,500,000 of revenue makes a tax loss of AED 400,000 in 2026. In 2027 its revenue grows to AED 4,500,000 and its profit to AED 1,000,000, so it can no longer use the relief.
- If it filed an ordinary return for 2026, it sets the AED 400,000 loss against 2027 profit. Taxable profit becomes AED 600,000 and the tax is AED 20,250.
- If it elected the relief for 2026, the loss is gone. The tax on AED 1,000,000 is AED 56,250.
The election cost AED 36,000, and it brought no saving in 2026, because a loss year has no tax to save. In a loss-making year, the relief is usually worth electing only if the business expects to stay under AED 3,000,000 of revenue until 2029.
Individuals Below AED 1,000,000 Turnover
An individual who runs a business becomes a corporate taxpayer only when the turnover of that business exceeds AED 1,000,000 in a calendar year. This floor is set by a 2023 Cabinet decision. Turnover is gross income for the calendar year, before expenses. Below the floor, the individual does not register and pays nothing.
Salary, personal investment income and income from real estate held without a licence never count toward the floor, however large they are. For example, a freelance designer with AED 900,000 of fees and a rented-out apartment is outside corporate tax. A designer with AED 1,200,000 of fees must register. That designer then pays 0%/9% on business profit, or elects Small Business Relief if revenue stays within AED 3,000,000.
0% Withholding Tax on Payments to Foreign Companies
Withholding tax is corporate tax that the payer deducts from UAE-source income paid to a foreign company. The corporate tax law sets its rate at 0%. Because it is charged on the payment itself rather than on profit, the AED 375,000 band does not apply to it, and the size of the payment does not matter. A Dubai company that pays a foreign consultant AED 2,000,000 withholds nothing. If the consultant has no office or other presence in the UAE, it does not register with the FTA and pays no UAE corporate tax on that fee.
This 0% covers only foreign companies with no permanent establishment and no nexus in the UAE. A permanent establishment is a fixed place of business or a dependent agent in the UAE. A foreign company has a nexus if it earns income from UAE real estate. A foreign company with either one registers and pays the ordinary 0%/9% on the profit linked to it, with the same AED 375,000 band. The Cabinet may set a different withholding rate in future. As of October 2026 it has not done so.
How to Confirm Which 0% Rule Applies to Your Business
Checking which case applies takes five steps in this order, because each step depends on the one before.
Common Mistakes Where 0% Turns Into 9%
- Splitting one business into several companies. Some owners split one business to use the AED 375,000 band or Small Business Relief more than once. If the FTA finds that the split has no commercial reason and the companies run substantially the same business, it treats the split as a scheme to obtain a tax advantage. It then collects the unpaid tax and penalties.
- Forgetting one-off income in revenue. The proceeds from selling a car, equipment or part of the business count as revenue. A single sale can push revenue over AED 3,000,000, and the relief is then lost for every later year.
- Electing the relief in a loss year without doing the sums. The loss of that year cannot be carried forward. This is expensive if revenue is about to grow past the threshold.
- Treating free zone registration as QFZP status. A free zone licence alone gives nothing. Without substance, audited statements or a qualifying activity, the company pays 0%/9% like any mainland company.
- Selling to individuals from a QFZP. Retail sales to individuals are an excluded activity in most sectors. Once they pass the de minimis limit, all profit is taxed at 9% for five periods.
- Combining two reliefs. A QFZP cannot also elect Small Business Relief, whatever its revenue.
- Missing the individual's floor in the middle of the year. Once business turnover passes AED 1,000,000 within the calendar year, registration and tax apply to that year, not only to the next one.
Bottom Line: Choose Your 0% Route Before the 2026 Return
For a company with a calendar financial year, the 2026 tax period ends on 31 December 2026, and its return is due within nine months, by 30 September 2027. Small Business Relief is elected in that return, so the decision belongs in the 2026 year-end close.
- By 31 December: check 2026 revenue and any asset sales against AED 3,000,000, and free zone revenue against the de minimis limit.
- At year-end close: calculate taxable profit or loss, and decide whether the relief is worth more than the loss it would cancel.
- By 30 September 2027: file the return with the right election.
We prepare this as part of our tax compliance work. The revenue and activity split comes out of regular accounting, not a one-off exercise at filing time.
Frequently Asked Questions
Q: Is corporate tax in the UAE really 0%?
Partly. Corporate tax in the UAE is 0% on the first AED 375,000 of taxable profit and 9% on profit above it. It is 0% on all profit only in special cases: qualifying income of a qualifying free zone person, Small Business Relief for revenue up to AED 3,000,000, and individuals with business turnover below AED 1,000,000.
Q: How much tax does a UAE company pay on AED 500,000 of profit?
A UAE company with AED 500,000 of taxable profit pays AED 11,250 of corporate tax. The first AED 375,000 is taxed at 0% and the remaining AED 125,000 at 9%. If its revenue is no more than AED 3,000,000 and always has been, it can elect Small Business Relief and pay nothing.
Q: How long is Small Business Relief available in the UAE?
Small Business Relief is available for tax periods ending on or before 31 December 2029. A 2026 Ministerial decision, published by the Ministry of Finance in August 2026, extended it from the original end date of 31 December 2026. The AED 3,000,000 revenue threshold is unchanged.
Q: Can a company that elects Small Business Relief carry forward a tax loss?
No. A tax loss made in a period for which Small Business Relief is elected cannot be carried forward to any later period, and it is lost permanently. Losses from earlier periods filed without the relief are kept. They can be used in a later period filed under the ordinary rules, against up to 75% of taxable profit.
Q: Which activities are qualifying for a free zone company in the UAE?
Qualifying activities include manufacturing, processing, trading of qualifying commodities, holding shares, ship operation, reinsurance, fund and wealth management, headquarter and treasury services to group companies, aircraft financing and leasing, distribution through a designated zone, logistics and activities ancillary to them. Banking, most insurance and most transactions with individuals are excluded.
Q: Is there withholding tax on payments to foreign companies in the UAE?
The UAE withholding tax rate is 0%, so nothing is deducted from payments to foreign companies, whatever the amount. The AED 375,000 band is irrelevant because the tax applies to the payment, not to profit. A foreign company with a permanent establishment or nexus in the UAE registers and pays 0%/9% on the related profit.
Q: Does a freelancer in the UAE pay corporate tax?
A freelancer pays corporate tax only if business turnover exceeds AED 1,000,000 in a calendar year. Salary, personal investments and real estate held without a licence do not count toward that figure. Above the floor, the freelancer registers and pays 0%/9% on profit, or elects Small Business Relief if revenue is within AED 3,000,000.
Q: Do the 0% and 9% rates apply to large multinational groups?
Not on their own. Multinational groups with consolidated revenue of at least EUR 750 million in at least two of the four preceding financial years also pay a 15% domestic minimum top-up tax under a 2024 Cabinet decision. It applies to financial years starting on or after 1 January 2025.
How CoreLedger Can Help
- Track revenue each month against the AED 3,000,000 threshold and flag transactions that could push it over.
- Map free zone company revenue to qualifying or excluded activities at every month-end close and monitor the limit on non-qualifying revenue.
- Calculate taxable profit or loss at year-end and show, with a calculation, whether Small Business Relief would cost more than the loss it would cancel.
- Prepare and file the corporate tax return on EmaraTax, including the Small Business Relief election where it pays off.
- Prepare the financial statements and transfer pricing documentation a Qualifying Free Zone Person needs, and work with the auditor on the audited statements.
- Answer FTA queries on the return and the documents behind it.