How UAE Corporate Tax Works
UAE corporate tax (CT) applies to the net profit of businesses at a headline rate of 9%, with the first AED 375,000 of taxable income taxed at 0%. This two-tier structure means most small and medium businesses in Dubai, Abu Dhabi and Sharjah pay tax only on the portion of profit above the threshold, not on total profit.
Taxable income is not the same as accounting profit. You start from the net profit shown in your financial statements, then make adjustments required by the law: adding back non-deductible expenses (such as 50% of entertainment costs, fines and certain donations), excluding exempt income (like qualifying dividends and capital gains from participating interests), and applying transfer pricing adjustments for related-party transactions.
| Taxable Income Band | Rate |
|---|---|
| AED 0 – 375,000 | 0% |
| Above AED 375,000 | 9% |
| Qualifying Free Zone Income (QFZP) | 0% |
| Non-qualifying Free Zone Income | 9% |
Use our corporate tax calculator to model your own numbers, and pair it with the Small Business Relief calculator if your revenue is under AED 3 million.
Computing Taxable Income From Accounting Profit
The starting point for every UAE business is the accounting net profit prepared under IFRS or IFRS for SMEs. From there, the Federal Tax Authority (FTA) requires specific adjustments before you arrive at taxable income.
- Add back: 50% of entertainment expenditure, donations to non-qualifying entities, fines and penalties, and interest exceeding the general interest deduction limitation (30% of EBITDA).
- Deduct: exempt income such as dividends from UAE resident companies and qualifying participation gains.
- Adjust: unrealised gains/losses depending on the realisation basis election, and related-party transactions restated at arm's length under transfer pricing rules.
- Carry forward: tax losses (up to 75% of taxable income in a future period) if the continuity of ownership and business tests are met.
Businesses with revenue below AED 3 million can elect Small Business Relief and treat taxable income as nil, avoiding these adjustments entirely for the relevant tax period. Accurate bookkeeping is essential to get these adjustments right — our bookkeeping and accounting team maintains FTA-compliant records throughout the year.
Small Business Relief (Revenue Under AED 3 Million)
Small Business Relief is an elective simplification available to UAE resident taxpayers whose revenue in the current and all previous tax periods is below AED 3,000,000. Eligible businesses can elect to be treated as having no taxable income, meaning zero corporate tax and simplified record-keeping.
Revenue threshold: AED 3,000,000 per tax period. Available for tax periods ending before or on 31 December 2026. Not available to Qualifying Free Zone Persons or members of multinational groups with consolidated revenue over AED 3.15 billion.
Even if you elect Small Business Relief, you must still register for corporate tax and file a return declaring the election — there is no exemption from the registration and filing obligation itself. Run your numbers through the Small Business Relief calculator before deciding, since the election is made per tax period and can affect loss carry-forward eligibility.
Free Zone Businesses and the 0% QFZP Regime
Companies registered in free zones such as IFZA, DMCC, Meydan Free Zone, SHAMS and JAFZA may qualify as a Qualifying Free Zone Person (QFZP) and pay 0% corporate tax on qualifying income, while non-qualifying income is taxed at the standard 9% rate.
To maintain QFZP status, a free zone entity must maintain adequate substance in the UAE, earn qualifying income (such as income from other free zone persons or qualifying activities like manufacturing, holding of shares, and certain distribution activities from a designated zone), not elect to be taxed under the standard regime, and comply with transfer pricing documentation requirements.
- Qualifying income generally includes transactions with other free zone persons and income from qualifying activities.
- Excluded activities (e.g. income from immovable property outside a free zone, banking, insurance and most income from natural persons) are always taxed at 9%.
- A de minimis rule allows a small amount of non-qualifying revenue (the lower of AED 5 million or 5% of total revenue) without losing QFZP status entirely.
Free zone businesses still must register for corporate tax even where they expect 0% tax, and should keep audited financial statements. Our tax advisory service reviews free zone structures to confirm QFZP eligibility before filing.
Worked Examples in AED
Example 1 — Mainland trading company, Dubai: Accounting profit of AED 850,000, with AED 20,000 of non-deductible entertainment add-backs. Taxable income = AED 870,000. Tax = 0% on the first AED 375,000 (AED 0) + 9% on the remaining AED 495,000 = AED 44,550.
Example 2 — Small consultancy, Sharjah: Revenue AED 2.4 million, accounting profit AED 300,000. Since revenue is below AED 3 million, the business elects Small Business Relief. Taxable income is treated as nil, and corporate tax payable is AED 0, but the CT return must still be filed.
Example 3 — Free zone distributor, JAFZA: AED 1.2 million of qualifying free zone income taxed at 0%, plus AED 150,000 of non-qualifying mainland income. Tax = 9% x AED 150,000 = AED 13,500. The qualifying income remains untaxed provided substance and de minimis conditions are met.
| Scenario | Taxable Income (AED) | Tax Due (AED) |
|---|---|---|
| Mainland trading company | 870,000 | 44,550 |
| Small consultancy (SBR elected) | 0 (relief) | 0 |
| Free zone distributor | 150,000 non-qualifying | 13,500 |
Try your own figures with the corporate tax calculator, and cross-check payroll costs feeding into your profit using the payroll calculator.
Corporate Tax Registration on EmaraTax
Every taxable person — mainland companies, free zone entities and certain natural persons conducting business — must register for corporate tax through the EmaraTax portal and obtain a Tax Registration Number (TRN), even if they ultimately owe zero tax.
Registration deadlines are tied to the month a licence was issued, and the FTA has already levied late registration penalties of AED 10,000 on businesses that missed their assigned window. If you have not yet registered, act immediately — our corporate tax registration service for AED 799 handles the EmaraTax submission end-to-end, 100% online.
- Documents needed: trade licence, Emirates ID and passport of owners/managers, Memorandum of Association, and financial contact details.
- Registration is per legal entity — group companies each need their own TRN unless a Tax Group election is made.
- Natural persons conducting a business in the UAE with turnover above AED 1 million must also register.
Filing Deadlines and Payment
Corporate tax returns are due within 9 months of the end of the relevant tax period. For a standard financial year ending 31 December 2025, the CT return and any tax payment are due by 30 September 2026.
Businesses with a financial year ending 31 March 2026 must file and pay by 31 December 2026. It is important to confirm your own financial year-end, since the 9-month clock always runs from that date, not from the calendar year.
| Financial Year End | CT Return & Payment Due |
|---|---|
| 31 December 2025 | 30 September 2026 |
| 31 March 2026 | 31 December 2026 |
| 30 June 2026 | 31 March 2027 |
Our corporate tax filing service, from AED 999*, prepares your return, reconciles the tax adjustments, and submits through EmaraTax before your deadline.
Corporate Tax Penalties
The FTA imposes clear administrative penalties for corporate tax non-compliance, and these apply equally to mainland and free zone businesses in Dubai, Abu Dhabi and across the Emirates.
| Violation | Penalty (AED) |
|---|---|
| Late corporate tax registration | 10,000 |
| Late filing of CT return | 500 per month (first 12 months), then 1,000 per month |
| Late payment of tax due | 14% per annum, calculated monthly on unpaid tax |
| Failure to maintain required records | 10,000 (20,000 for repeat violation) |
| Incorrect tax return resulting in tax difference | Up to 50% of the tax difference |
Late registration alone costs AED 10,000 — more than 12 years of the AED 799 registration fee. Register early and mark your filing deadline the moment your financial year closes.
How to Use the Corporate Tax Calculator
Our corporate tax calculator is designed for quick, accurate estimates. Enter your annual accounting profit, add any known disallowed expenses, indicate whether you are a mainland or qualifying free zone entity, and the tool instantly applies the 0%/9% bands.
- 1Enter total revenue to check Small Business Relief eligibility (under AED 3 million).
- 2Enter accounting net profit for the period.
- 3Add back non-deductible items such as fines, 50% of entertainment costs, and excess interest.
- 4Select mainland or free zone status; if free zone, indicate the qualifying income split.
- 5Review the estimated taxable income and tax payable, then plan your EmaraTax filing.
The calculator gives an indicative figure — always have a UAE tax expert review complex situations such as tax groups, transfer pricing, or foreign permanent establishments before filing.
Common Corporate Tax Mistakes
Many businesses in Dubai, Abu Dhabi and Sharjah make avoidable errors when self-assessing corporate tax for the first time.
- Assuming free zone status automatically means 0% tax without checking QFZP substance and qualifying income conditions.
- Forgetting that Small Business Relief must be actively elected in the tax return, not applied automatically.
- Missing the registration deadline because it is tied to licence issue month, not the tax period start.
- Failing to add back disallowed expenses like fines, penalties and 50% of entertainment costs.
- Not keeping the required 7 years of financial records, risking a AED 10,000 penalty on audit.
Combine your corporate tax planning with clean bookkeeping. Our SME accounting and backlog accounting services bring historical records up to date before your first CT filing.