The UAE levies a 9 % federal corporate tax on net taxable income above AED 375,000. The first AED 375,000 is taxed at 0 %. Every UAE entity — mainland, free zone, and offshore — must register with the Federal Tax Authority (FTA), even if it owes no tax. Corporate tax applies to net profit after deducting allowable business expenses, interest, and depreciation — not to gross revenue. Last updated: May 2026.
For the broader GCC tax comparison, see taxation in the GCC: a complete guide for foreign businesses. For the free zone 0 % pathway, see UAE free zone tax: QFZP conditions and the 0 % rate explained.
Who pays UAE corporate tax?
Three categories of entities pay UAE corporate tax:
- UAE resident persons — any legal entity incorporated in the UAE (mainland, free zone, or offshore), plus foreign entities effectively managed and controlled in the UAE
- Non-resident persons with a Permanent Establishment (PE) — foreign companies operating through a fixed place of business in the UAE, including branches
- Non-resident persons earning UAE-sourced income — foreign entities receiving rent, royalties, or management fees from UAE sources
Natural persons — individuals — are not subject to UAE corporate tax on employment income, personal investments, or real-estate income. Corporate tax applies only to legal entities and to individuals conducting licensed business activities generating revenue above AED 1 million.
What is the AED 375,000 threshold?
The AED 375,000 threshold is a zero-rate band, not an exemption. All taxable income up to AED 375,000 is taxed at 0 %. Income above AED 375,000 is taxed at 9 %. This applies per entity, per tax period.
A company with AED 1,000,000 in taxable income pays: 0 % on the first AED 375,000 = AED 0, plus 9 % on the remaining AED 625,000 = AED 56,250. The effective tax rate is 5.63 %.
The threshold is not cumulative. Each tax period resets the AED 375,000 band.
What is Small Business Relief?
Small Business Relief (SBR) under Ministerial Decision No. 73 of 2023 allows UAE resident taxpayers with annual revenue at or below AED 3 million to elect to treat their taxable income as zero. According to Crimson Legal’s 2026 compliance guide, 2026 is the final year of SBR eligibility — the relief applies to tax periods ending on or before 31 December 2026.
SBR must be actively elected on the corporate tax return filed through the EmaraTax portal. It does not apply automatically. Electing SBR eliminates tax liability for the period but forfeits the right to carry forward tax losses and net interest deductions.
SBR is not available to Qualifying Free Zone Persons (QFZPs) or members of multinational enterprise groups with consolidated revenue exceeding EUR 750 million.
What are the filing and payment deadlines?
Corporate tax returns are due within 9 months of the end of the relevant tax period. For a standard January–December fiscal year, the filing deadline is 30 September of the following year.
Late filing incurs AED 500 for a first offence and AED 1,000 for subsequent periods. Late payment attracts 14 % annual interest on the outstanding tax amount, with no cap, under the revised penalty regime introduced by Cabinet Decision No. 129 of 2025 (effective 14 April 2026).
Voluntary disclosures filed before an FTA audit notification incur a reduced penalty of 1 % per month on the tax difference. Post-audit disclosures trigger 15 % fixed plus 1 % monthly. According to Kayrouz & Associates’ March 2026 analysis, proactive voluntary disclosure is the most cost-effective compliance correction path.
What expenses are deductible?
UAE corporate tax is calculated on net profit after allowable deductions. Deductible expenses include:
- Ordinary business expenses incurred wholly and exclusively for business purposes
- Employee salaries, benefits, and end-of-service gratuity
- Rent, utilities, and office operating costs
- Depreciation and amortisation of fixed assets
- Interest expense (subject to OECD-aligned thin-capitalisation rules)
- Bad-debt provisions meeting FTA criteria
- Professional fees, insurance premiums, and compliance costs
Non-deductible expenses include personal expenses, fines and penalties, dividends paid, donations to non-qualifying entities, and entertainment expenses exceeding specified thresholds.
What is the Transfer Pricing framework?
The UAE’s transfer pricing rules under Ministerial Decision No. 97 of 2023 align with OECD Transfer Pricing Guidelines. Related-party transactions must follow the arm’s length principle.
Documentation requirements apply at two thresholds: Master File and Local File are required if UAE revenue exceeds AED 200 million or if the entity is part of an MNE group with consolidated revenue exceeding AED 3.15 billion. According to SimplySolved’s December 2025 update, transfer pricing documentation must be provided within 30 calendar days upon FTA request.
Even below these thresholds, the arm’s length principle applies to all related-party transactions. The FTA can request supporting analysis during any review.
Frequently asked questions
Does UAE corporate tax apply to salary income?
No. Natural persons are not taxed on employment income, investment returns, or real-estate gains. Corporate tax applies only to legal entities and to individuals conducting licensed business activities above AED 1 million annual revenue.
What happens if I don’t register for corporate tax?
All UAE entities must register with the FTA, regardless of whether they owe tax. Late registration incurs an AED 10,000 administrative penalty under FTA Decision No. 3 of 2024. This includes offshore companies and dormant free zone entities.
Can I carry forward tax losses?
Yes. Tax losses can be carried forward to offset up to 75 % of taxable income in future periods, with no time limit. Loss carry-forward is forfeited for tax periods in which Small Business Relief is elected.
Sources and further reading
- Federal Decree-Law No. 47 of 2022 — UAE Corporate Tax Law, effective 1 June 2023
- FTA Decision No. 3 of 2024 — Mandatory CT registration for all UAE entities
- Cabinet Decision No. 129 of 2025 — Revised penalty framework, effective 14 April 2026
- Ministerial Decision No. 73 of 2023 — Small Business Relief
- Ministerial Decision No. 97 of 2023 — Transfer pricing documentation requirements
- UAE Federal Tax Authority — EmaraTax portal and compliance guidance (tax.gov.ae)