The UAE introduced federal corporate tax for financial years starting on or after June 1, 2023, ending its decades-long reputation as a fully tax-free business hub, though the rate and thresholds remain genuinely competitive by global standards. Understanding exactly how it applies, what's taxed, what isn't, and what deadlines matter, is essential for every business operating in Dubai today. Contact Raes Associates for a free consultation on your corporate tax obligations.
What Is UAE Corporate Tax?
Corporate tax is a direct tax levied on the net profit of businesses operating in the UAE. It applies to mainland companies, free zone companies, and, in certain cases, foreign entities with a taxable presence in the UAE. The Federal Tax Authority (FTA) administers registration, filing, and enforcement.
Corporate Tax Rates and Thresholds
The standard structure is straightforward:
On taxable income up to AED 375,000
On taxable income above AED 375,000
This applies uniformly across mainland companies and most free zone companies on their standard income, though free zone companies have an additional layer worth understanding (covered below).
Who Needs to Register?
Every taxable person conducting business in the UAE is generally required to register with the FTA and obtain a Corporate Tax Registration Number, regardless of whether the company is currently profitable.
This includes companies that haven't started generating revenue yet, registration is tied to incorporation, not to earnings. Registration must be completed within three months of incorporation for companies formed on or after March 1, 2024, missing this deadline results in a fixed AED 10,000 penalty.
Free Zone Companies: Qualifying Free Zone Person Status
This is one of the most misunderstood parts of the regime. Being incorporated in a free zone does not automatically mean your income is taxed at 0%. To benefit from the 0% rate on qualifying income, a free zone company must meet Qualifying Free Zone Person (QFZP) conditions, including maintaining adequate substance in the UAE, earning income from specifically defined qualifying activities, and meeting a de minimis threshold on non-qualifying income.
Income that doesn't meet these conditions, including most income from transactions with UAE mainland businesses, is generally taxed at the standard 9% rate above the AED 375,000 threshold. For a deeper breakdown of this specifically, see our guide on UAE Free Zone Corporate Tax Filing Guide .
Small Business Relief
Businesses with revenue at or below AED 3 million can elect for Small Business Relief, treating them as having no taxable income for that period and relieving them of the standard compliance burden.
As of an August 2026 Ministry of Finance decision, this relief now runs through tax periods ending on or before December 31, 2029, extended from the earlier 2026 cutoff. It's not available to companies that are part of a multinational group falling under BEPS Pillar Two rules.
Filing Deadlines and Penalties
Corporate tax returns and any tax due must generally be filed and paid within nine months from the end of the relevant tax period. Businesses with more complex structures, multiple revenue streams, international transactions, or related-party dealings, often need professional support to manage this accurately.
Missing registration or filing deadlines results in fixed penalties, and late payment carries additional charges that compound the longer it remains unresolved. For the full registration process specifically, see our guide on FTA Corporate Tax Registration UAE: Complete Guide for Businesses .
Transfer Pricing and Related-Party Transactions
If your UAE company transacts with Related Parties or Connected Persons, transfer pricing rules apply, based on the arm's length principle, meaning these transactions should be priced as though conducted between independent parties. This applies to both domestic and cross-border transactions, and businesses with significant related-party dealings may need formal documentation and analysis to support their filing position.
Record-Keeping Requirements
Under the corporate tax framework, businesses must retain relevant financial and transactional records for at least seven years after the end of the relevant tax period. The FTA has specifically emphasized maintaining records that support the figures reported in your corporate tax return, good record-keeping isn't just a compliance formality, it directly protects you in the event of an audit or review.
Seven-year record-keeping period: Relevant financial and transactional records must be retained for at least seven years after the end of the relevant tax period.
Need Help With Your Corporate Tax Compliance?
From registration and QFZP qualification to filing and transfer pricing documentation, corporate tax compliance touches nearly every part of running a UAE business. Contact Raes Associates and our team of certified accountants will handle your registration, filing, and ongoing compliance so you can focus on running the business itself.
Contact Raes AssociatesFAQs
Corporate tax applies to taxable income above AED 375,000, and free zone companies may qualify for 0% on qualifying income under QFZP status. Registration, however, is required for almost all businesses regardless of profitability.
Yes, registration is tied to incorporation, not to earnings, and must be completed within three months of incorporation to avoid a fixed AED 10,000 penalty.
No, this is a common misconception. Free zone companies must meet specific Qualifying Free Zone Person conditions to benefit from the 0% rate on qualifying income; other income is generally taxed at the standard 9% rate.
Businesses with revenue at or below AED 3 million can elect for Small Business Relief, treating them as having no taxable income. This relief now runs through tax periods ending on or before December 31, 2029.
Returns and any tax due must generally be filed within nine months from the end of the relevant tax period.
Relevant financial and transactional records must be retained for at least seven years after the end of the relevant tax period.
