For decades, the UAE maintained its position as a zero-tax jurisdiction. However, that changed in June 2023 when Federal Decree-Law No. 47 introduced a standard 9% corporate tax on business profits.
The complexity goes beyond just paying 9% on profits. Free Zone companies that previously enjoyed full tax exemption now need to prove they qualify as a Qualifying Free Zone Person (QFZP) to maintain their 0% rate. Mainland businesses need to understand what income is taxable and what qualifies for relief.
As for multinational groups with revenues over €750 million, they face an additional Domestic Minimum Top-up Tax to align with OECD’s 15% global minimum rate.
This guide explains how UAE corporate tax applies to your business, what you need to do to stay compliant, and the critical deadlines you cannot afford to miss.
Understanding UAE’s Corporate Tax Regulation
Corporate tax in the UAE is governed by Federal Decree-Law No. 47 of 2022, which established the core framework, tax rates, and compliance requirements. Federal Decree-Law No. 60 of 2023 later introduced a Domestic Minimum Top-up Tax for large multinational enterprises, aligning with the OECD’s Pillar Two framework to ensure a global minimum effective tax rate of 15%.
The tax applies from the first financial year beginning on or after 1 June 2023. It is calculated on your company’s net profits after accounting for available exemptions and disallowed expenses.
The tax is calculated on your company’s net profits after accounting for available exemptions and disallowed expenses.
For 2025, the applicable corporate tax rates are as follows:
| Taxable Income | UAE Corporate Tax Rate (%) |
| Taxable income below AED 375,000 | 0% |
| Taxable income exceeding AED 375,000 | 9% |
| Qualifying income of a Qualifying Free Zone Person (QFZP) | 0% |
| Non-qualifying income of a Qualifying Free Zone Person (QFZP) | 9% |
If your business earns AED 500,000 in taxable income, only the portion above AED 375,000 (AED 125,000) is taxed at 9%, resulting in AED 11,250 in corporate tax.
For Free Zone companies, maintaining 0% tax requires strict compliance with QFZP criteria, something we’ll cover in detail below.
Who is Subject To Corporate Tax in The UAE?
Corporate tax applies to all UAE businesses based on a residency principle: UAE residents are taxed on worldwide income, while non-residents are taxed only on UAE-sourced income.
Under the UAE Corporate Tax Law, a “taxable person” includes:
- UAE-Incorporated Companies and Juridical Persons: Any entity incorporated in the UAE or effectively managed and controlled from within the country is considered a UAE tax resident and subject to corporate tax on global income.
- Natural Persons (Individuals): Individuals are subject to corporate tax only if they engage in a business or business activity in the UAE, as defined by Cabinet Decision. This typically applies to individual business owners, freelancers with trade licenses, or sole proprietors generating commercial revenue.
- Non-Resident Juridical Persons: Foreign entities with a Permanent Establishment (PE) in the UAE are liable for corporate tax on income attributable to that PE. A PE generally includes a fixed place of business, dependent agents, or significant projects lasting more than six months.
UAE Corporate Tax on Non-Residents Entities
If you are a non-resident and have no Permanent Establishment in the UAE, you are not subject to Corporate Tax.
However, if you earn UAE-sourced income not attributed to a Permanent Establishment, you are subject to withholding tax. This is charged at 0% and is usually applied to cross-border payments like dividends, interest, and royalties.
Although the rate of tax is zero, the withholding tax system remains a critical reporting and compliance tool. It enables the government to trace certain payments made to non-residents.
To determine your group’s taxable income, use our Corporate Tax calculator alongside Emerhub’s expert guidance.
Do Free Zone Companies Pay Corporate Tax in UAE?
Under the corporate tax rules, if you operate a company in a Free Zone and meet the criteria of a Qualifying Free Zone Person (QFZP), you can maintain a 0% tax rate and keep your tax-exempt status as allowed by the laws of that zone.
The entire Free Zone tax regime hinges on distinguishing between income types:
| Income Type | Tax Rate | Description |
| Qualifying Income | 0% | Income derived from Qualifying Activities, primarily transactions with other Free Zone Persons or specific international transactions (e.g., manufacturing, logistics, certain services). This income is tax-exempt. |
| Non-Qualifying Income | 9% | Income derived from Excluded Activities or certain transactions with UAE mainland customers. This income is subject to the standard 9% Corporate Tax rate. |
Criteria to be a Qualifying Free Zone Person (QFZP)
To be considered a Qualifying Free Zone Person, you must satisfy several conditions:
- Maintain adequate economic substance by ensuring your business has sufficient employees, expenses, and physical presence to carry out its Core Income Generating Activities (adequate substance means having an appropriate number of qualified employees, operational spending, and premises aligned with the scale of your Relevant Activities).
- Derive qualifying income from qualifying activities.
- The Free Zone Person must not have opted to be subject to the standard UAE Corporate Tax regime
- Comply with the Arm’s Length Principle for transactions with related parties and with their domestic or foreign permanent establishments (Under Article 61 of the UAE Corporate Tax law, the opening balance for corporate tax purposes must be an extension of the closing balance sheet. It should be adjusted according to the arm’s length principle to accurately reflect the company’s financial position and prevent past transactions from distorting future tax liabilities).
- Maintain Transfer Pricing documentation.
- Maintain audited Financial Statements.
- Meet the de minimis requirement, meaning its non-qualifying revenue does not exceed the lower of AED 5 million or 5% of its total revenue.
Companies Exempt from Corporate Tax in the UAE
While many businesses are subject to Corporate Tax, certain entities are designated as “Exempt Persons” due to their significance to the UAE’s economy and social structure. These exemptions fall into several categories:
- Automatically Exempt: Government Entities and certain Government-Controlled Entities are exempt from Corporate Tax and related compliance obligations unless they carry out taxable activities.
- Exempt if Notified to the Ministry of Finance: Extractive Businesses (oil, gas, other natural resources) and Non-Extractive Natural Resource Businesses are exempt if they meet the required conditions and formally notify the Ministry of Finance.
- Exempt if Listed in a Cabinet Decision: Qualifying Public Benefit Entities, such as registered charities, endowments, or private foundations, are exempt if explicitly designated in a Cabinet Decision.
- Exempt if Approved by the Federal Tax Authority (FTA): These organizations must formally apply to and get approval from the Federal Tax Authority to be considered exempt. The exemption is subject to certain conditions and includes entities such as public or private pension and social security funds, Qualifying Investment Funds, and wholly-owned UAE subsidiaries of Government Entities, Government-Controlled Entities, Qualifying Investment Funds, or approved pension and social security funds.
Adhere to UAE Corporate Tax Regulations With Emerhub
As per the new regulations, you must register, file, and pay your Corporate Tax within nine months from the end of your financial year. For instance, if your business is following a January to December financial year, the first corporate tax return is due by 30 September of the next year.
Note that If you fail to register for UAE Corporate Tax within the deadlines set by the Federal Tax Authority, you will face an AED 10,000 administrative penalty.
At Emerhub, our experts can guide you through every step of this process. We help you with:
- Assessing your tax status: We will determine if your business is subject to Corporate Tax and when your obligations begin.
- Streamlining compliance: Our experts help ensure your business meets all requirements, from registration to filing your tax return.
- Managing documentation: Our experts will help prepare all the documents needed for your filing, including financial statements, payroll data, and tax schedules.
- Staying updated: We monitor guidance from the Ministry of Finance and the Federal Tax Authority, keeping your business informed of regulatory changes and new compliance requirements.
Have you registered for corporate tax yet? For personalized guidance, fill out the form below and our experts will reach out to you.
Frequently asked questions
For tax periods ending on or before 31 December 2026, you can claim Small Business Relief. This applies if your revenue does not exceed AED 3 million during the current and all previous tax periods. To qualify, you must be a UAE resident business and not a financial institution or holding company. If you meet these conditions, your business is treated as if it has no taxable income, giving you reduced compliance requirements and simplified tax filings.
Capital gains are subject to corporate tax unless you qualify for the participation exemption. To qualify, you must:
- Own at least 5% of the entity
- Hold the interest for at least 12 months (or intend to)
- Ensure the entity is taxed at a rate not lower than 9% in its jurisdiction
Dividends from UAE companies are exempt, while foreign dividends are exempt if the above conditions are satisfied. Tax losses can be carried forward to offset up to 75% of taxable income in future years, but you cannot apply them to previous years. Losses can also be transferred to related entities if at least 75% ownership is maintained.
From 1 January 2025, the UAE applies the Domestic Minimum Top-up Tax (DMTT) under Federal Decree-Law No. 60 of 2023. If your multinational group has global consolidated revenues above €750 million in at least two of the past four years, you fall under this rule. The DMTT ensures you pay at least 15% effective tax on your UAE operations, in line with the OECD’s GloBE Model Rules.
You must register for corporate tax with the Federal Tax Authority, even if you are already VAT-registered. Registration is completed electronically within the prescribed timelines. You are required to file only one corporate tax return per financial year, reducing your administrative workload. All returns, tax payments, and transfer pricing disclosures must be filed within nine months of the end of your financial year. For example, if your financial year ends in December 2023, your first return and transfer pricing disclosure are due by 30 September 2025. Missing deadlines results in penalties.
Yes, if you overpay corporate tax, you can apply for a refund through the FTA portal. The application must include supporting documents and justifications for the overpayment. The FTA will review your case, and if approved, the refund will be processed or credited against future liabilities. Emerhub will assist in preparing and submitting refund claims to ensure timely resolution.
