A complete, accurate guide to UAE corporate tax in 2026 — the 9% rate, the AED 375,000 threshold, who qualifies for 0% exemption, free zone QFZP rules, Small Business Relief, registration deadlines, and how your business setup choice affects your tax position.
What Is UAE Corporate Tax and When Did It Start?
The UAE introduced a federal corporate tax (CT) for the first time in its history through Federal Decree-Law No. 47 of 2022, issued by the Federal Tax Authority (FTA). The law applies to financial years beginning on or after 1 June 2023. For companies with a financial year that starts on 1 January, the first CT-liable period was 1 January 2024 to 31 December 2024, with the first tax return due by 30 September 2025.
This marked a fundamental shift in the UAE’s tax landscape, which had been effectively tax-free for most businesses since the country’s founding. The corporate tax was introduced primarily to align the UAE with the OECD’s global minimum tax framework (Pillar Two) and to diversify federal government revenue beyond oil.
- Tax rate: 9% on taxable income above AED 375,000 per financial year
- Threshold: 0% on the first AED 375,000 of taxable income — effectively a small business exemption built into the standard rate
- First applicable period: Financial years beginning on or after 1 June 2023
- Administered by: The Federal Tax Authority (FTA) through the EmaraTax portal
- Personal income: UAE corporate tax does NOT apply to personal income from employment, dividends, capital gains from personal investments, or real estate held in personal name
Dubai International Advisory Consultants are your trusted business setup consultants in Dubai with 14 years of experience in UAE business registration and compliance. Our VAT and corporate tax consultants in Dubai manage UAE CT registration, return filing, and FTA compliance for businesses across all sectors and company structures.
Who Must Pay 9% Corporate Tax in UAE?
The UAE 9% corporate tax applies to what the law calls a “Taxable Person.” Here is the complete picture of who falls into the taxable category and at what rate:
| Business Type | CT Rate | Condition |
| UAE Mainland company (taxable income >AED 375K) | 9% | Standard rate applies on all taxable income above the AED 375,000 threshold |
| UAE Mainland company (taxable income up to AED 375K) | 0% | Small Business Relief (SBR) applies; income below threshold is fully exempt |
| Qualifying Free Zone Person (QFZP) | 0% | On qualifying income only; must meet all five QFZP conditions including substance and de minimis revenue test |
| Free zone company (non-qualifying income) | 9% | Income from UAE mainland clients or excluded activities is taxable at 9% even for QFZP entities |
| Natural person (individual) business income | 0% | Personal income from employment, investments, and real estate is not subject to UAE CT |
| Extractive businesses (oil, gas, natural resources) | Emirate-level tax | Subject to existing emirate-level tax concession agreements; UAE CT does not apply |
| Large multinationals (Pillar Two) | 15% | UAE implementing OECD Pillar Two for MNEs with global revenue above EUR 750 million |
The AED 375,000 Threshold in Practice
The AED 375,000 threshold is not a revenue threshold — it is a taxable income threshold. Taxable income is your revenue minus allowable deductions (business expenses, depreciation, interest within limits, and other permitted costs). A business with AED 600,000 in revenue but AED 300,000 in allowable expenses has AED 300,000 in taxable income — below the threshold — and pays 0% UAE corporate tax on all of it.
The Small Business Relief (SBR) — Additional Exemption
Businesses with total revenue of AED 3 million or less in a tax period can elect to be treated as having zero taxable income for that period through the Small Business Relief mechanism. SBR is available for tax periods ending on or before 31 December 2026 as a transitional measure. Businesses must actively elect SBR with the FTA — it is not automatically applied.
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Which Businesses Are Exempt from UAE Corporate Tax?
Several categories of person and business are categorically exempt from UAE corporate tax, meaning they are not required to pay CT regardless of income level. Here is the complete exempt category list:
| Exempt Entity Category | Why Exempt |
| UAE Government entities | Federal and emirate government bodies and their wholly-owned subsidiaries are categorically exempt |
| Qualifying Public Benefit Entities | Charities, non-profits, and public interest organisations registered under applicable law and approved by Cabinet |
| Qualifying Investment Funds | Regulated investment funds meeting specific FTA conditions; investors taxed on distributions instead |
| UAE pension and social security schemes | Government-regulated pension funds and social security bodies |
| Persons engaged in extraction of UAE natural resources | Subject to existing emirate concession agreements; excluded from federal UAE CT law |
| Small Business Relief recipients (SBR) | Businesses with taxable revenue at or below AED 3 million in the tax period; must elect SBR with FTA |
Important distinction: “Exempt” does not mean “no registration required.” Exempt entities may still need to register with the FTA and file a zero-liability CT return annually. The FTA confirms the registration obligation per entity type. Our team advises on whether your specific entity qualifies for exemption and what the ongoing filing obligations are.
Dividend and Capital Gains Exemptions
Even for taxable businesses, the UAE CT law provides specific income exemptions worth understanding:
- Dividends from UAE subsidiaries: Dividends received from UAE-resident subsidiaries are generally exempt from corporate tax at the parent level, preventing double taxation within UAE corporate groups
- Participation exemption: Dividends and capital gains from a qualifying ownership interest (generally 5% or above held for at least 12 months) in a UAE or foreign subsidiary are exempt under the Participation Exemption
- Qualifying group transactions: Intragroup transactions between UAE-resident group members can be treated as outside the tax base, simplifying the tax position of UAE corporate groups
Free Zone Companies and Corporate Tax: The QFZP Rule
This is the most searched and most misunderstood area of UAE corporate tax. The short answer: free zone companies are not automatically exempt from UAE corporate tax. Whether your free zone company pays 0% or 9% depends entirely on whether it qualifies as a Qualifying Free Zone Person (QFZP) under Federal Decree-Law No. 47 of 2022.
The 5 QFZP Conditions You Must Meet
- Condition 1 — Maintain adequate substance: Your free zone company must have genuine economic substance in the UAE. This means adequate staff, operating expenditure, and management decisions made in the UAE — not just a registered office with no real presence
- Condition 2 — Qualifying income only: Your income must primarily come from qualifying activities (transactions with other free zone entities and foreign clients). Income from UAE mainland clients or from excluded activities counts as non-qualifying
- Condition 3 — De minimis test: Non-qualifying income must not exceed 5% of total revenue OR AED 5 million — whichever is lower. Exceeding this threshold causes the entire company to lose QFZP status for that tax period
- Condition 4 — No elected mainland treatment: Your company must not have elected to be treated as a mainland taxable entity for CT purposes
- Condition 5 — Comply with transfer pricing rules: Transactions with related parties must be conducted at arm’s length and supported by proper transfer pricing documentation where required
If your free zone company meets all five QFZP conditions, qualifying income is taxed at 0%. If you fail any one condition, your entire income becomes taxable at 9% (above the AED 375,000 threshold) for that period.
The QFZP framework is covered in full technical detail in our dedicated guide: Qualifying Free Zone Person UAE: How to Keep 0% Tax in Your Free Zone. This guide covers the substance requirements, de minimis threshold management, and which activities qualify and which do not.
UAE Corporate Tax Registration: Timeline and Penalties
Every UAE business that falls within the scope of UAE CT (including exempt entities in most cases) must register with the FTA through the EmaraTax portal. Failing to register on time carries a fixed AED 10,000 administrative penalty. Here are the registration and filing deadlines:
| Registration Trigger | Registration Deadline | Notes |
| UAE companies incorporated before Mar 2024 | Varies by licence month | FTA has staggered deadlines based on month of trade licence issuance; check FTA portal for exact date |
| New UAE companies (incorporated from Mar 2024) | 3 months from incorporation | Must register with FTA within 3 months of the date of incorporation |
| Penalty for late registration | AED 10,000 | Fixed administrative penalty for failing to register within the deadline |
| Annual tax return filing deadline | 9 months after FY end | For a company with FY ending December 31, 2024 — CT return due September 30, 2025 |
| Penalty for late filing | AED 500 – 20,000+ | Escalating penalties based on duration of delay; interest may also apply on unpaid tax |
How to Register for UAE Corporate Tax
- Log into the FTA’s EmaraTax portal using your UAE Pass or registered credentials
- Navigate to “Register for Corporate Tax” and complete the entity information form
- Provide your trade licence number, financial year start date, and entity type classification
- Upload supporting documents including trade licence copy and company registration documents
- Receive your Tax Registration Number (TRN) for corporate tax purposes — separate from your VAT TRN if you already have one
Our VAT and corporate tax consultants in Dubai complete the EmaraTax CT registration on your behalf, ensuring the correct financial year, entity classification, and exempt status elections are made from the outset. Incorrect entity classifications made at registration can be difficult and time-consuming to correct after the first filing.
How UAE Corporate Tax Affects Your Dubai Business Setup Decision
For businesses that are yet to register or are deciding between mainland and free zone, UAE corporate tax is now a meaningful factor in the setup decision. Here is a practical guide to the CT position of each major setup type:
| Setup Type | CT Position | Key Consideration |
| Dubai Mainland (LLC) | 9% on taxable income above AED 375K; 0% on first AED 375K | Full UAE market access; most businesses earning under AED 375K pay 0% |
| UAE Free Zone (QFZP) | 0% on qualifying income; 9% on excluded/non-qualifying income | Must meet QFZP conditions; cannot trade freely with UAE mainland without triggering 9% |
| UAE Free Zone (non-QFZP) | 9% on income above AED 375K threshold | If your free zone company does not meet QFZP conditions, you pay 9% like mainland |
| Offshore company (RAK ICC, JAFZA) | Generally outside UAE CT scope if no UAE-sourced income | Offshore companies with no UAE PE and no UAE-sourced income typically not subject to UAE CT |
Dubai Mainland vs Free Zone: The CT Angle
Before UAE corporate tax, the conventional wisdom was that free zones were almost always more tax-efficient than mainland. In 2026, the picture is more nuanced:
- A mainland company with taxable income below AED 375,000 pays exactly the same 0% CT as a fully qualifying free zone company
- A mainland company also has full UAE market access — free zone companies cannot trade freely with mainland clients without risking their QFZP status
- For businesses whose clients are primarily UAE mainland (retail, hospitality, local services), a mainland structure is often more appropriate despite the 9% rate on income above AED 375,000, because the free zone QFZP conditions are difficult to maintain with significant mainland client income
- For businesses serving primarily international clients — export, consulting for overseas companies, online services — a free zone QFZP structure continues to offer genuine 0% tax efficiency provided the five QFZP conditions are maintained
Our consultants advise on the optimal structure for your specific business model. The setup decision — mainland, free zone, or offshore — is now a tax planning decision as much as a commercial one. For businesses considering a Dubai mainland company formation or a Dubai free zone company formation, we include a CT position assessment as part of every initial consultation.
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Frequently Asked Questions About UAE Corporate Tax 2026
1. Does my UAE free zone company have to pay corporate tax?
It depends on whether your free zone company qualifies as a Qualifying Free Zone Person (QFZP). If it meets all five QFZP conditions (adequate substance, qualifying income, de minimis test, no mainland election, arm’s length pricing), qualifying income is taxed at 0%. If it fails any condition, the 9% rate applies to taxable income above AED 375,000. Free zone companies are not automatically exempt from UAE CT.
2. What is the UAE corporate tax threshold for small businesses?
There are two thresholds to understand. First, 0% applies on the first AED 375,000 of taxable income for all businesses. Second, the Small Business Relief (SBR) allows businesses with total revenue at or below AED 3 million to elect zero taxable income for the period, effectively paying no CT. SBR is available for tax periods ending on or before 31 December 2026 as a transitional provision.
3. Does UAE corporate tax apply to individuals and sole traders?
Personal income from employment, dividends, and personal investments is not subject to UAE corporate tax. However, if an individual operates a business without a commercial licence and earns above the relevant thresholds, that business income may fall within CT scope. Sole traders with a UAE trade licence are subject to CT as a taxable person and must register with the FTA.
4. When is the UAE corporate tax registration deadline?
For companies incorporated before March 2024, registration deadlines were staggered by the FTA based on the month of licence issuance — most deadlines fell in 2024. For new companies incorporated from March 2024 onwards, CT registration must be completed within 3 months of the incorporation date. Late registration carries an AED 10,000 administrative penalty. Check the FTA’s EmaraTax portal for your specific deadline.
5. Is UAE corporate tax the same as VAT?
No. UAE VAT is a 5% consumption tax charged on the value of taxable goods and services at the point of sale. UAE corporate tax is a 9% tax on business net profits (taxable income) above AED 375,000 per year. A business can be registered for both VAT and CT simultaneously, and both are administered by the FTA through the EmaraTax portal. The registration, filing, and payment processes are separate for each tax.
6. Do offshore companies in UAE pay corporate tax?
UAE offshore companies (RAK ICC, JAFZA offshore, Ajman offshore) that have no permanent establishment (PE) in the UAE and no UAE-sourced income are generally outside the scope of UAE corporate tax for the income generated from their offshore activities. However, if an offshore company derives income from UAE sources or has a UAE PE, that income may be subject to UAE CT. The specific CT position of an offshore company depends on its activity, income sources, and operational structure.
About the Author
Adil Ahmad is a UAE business setup and tax compliance specialist at Dubai International Advisory Consultants with 14 years of experience in UAE corporate tax registration, VAT compliance, FTA filings, and business setup advisory for mainland and free zone companies across all UAE sectors. He has guided over 500 UAE businesses through their initial CT registration, QFZP assessment, and annual return filing process since the corporate tax law came into effect.
