What is the deadline for annual tax return filing?

Annual tax return must be filed within 9 months of fiscal year-end. Failure results in 5% penalty per month of delay on tax owed.

How does OECD Pillar Two DMTT (15%) affect my business?

DMTT applies from 2025 to multinational groups with consolidated revenue over EUR 750M. If your entity operates below 15%, top-up tax may apply. SMEs and non-multinational enterprises are not affected.

UAE Corporate Tax — Rate, QFZP & Compliance

Q: What is the QFZP regime and who is eligible?

QFZP is a special tax status offering 0% on qualifying income. Eligibility requires: free zone residency, genuine economic substance, IFRS-audited accounts, and qualifying activities (manufacturing, logistics, fund management, etc.).

Q: What qualifying activities benefit from the 0% QFZP rate?

Qualifying activities include: manufacturing, investment funds, logistics, aircraft/vessel operations, commodity trading, operational holding, engineering, and export distribution. Banking, insurance, tourism and residential real estate are excluded.

Legislative Framework

Standard Rate and Exemption Threshold

The federal regime applies a uniform rate of 9% on annual taxable profit of corporations (Federal Decree-Law No. 47 of 2022, art. 3). However, a substantial exemption has been implemented: no tax is due on the portion of annual taxable income not exceeding AED 375,000, a threshold set by Cabinet Decision No. 116 of 2022. This exemption applies to the first full fiscal year beginning June 1, 2023 or later. In addition, Small Business Relief allows resident businesses with revenue not exceeding AED 3 million to be treated as having no taxable income, for tax periods ending on or before 31 December 2026 (Ministerial Decision No. 73 of 2023).

Taxable profit is calculated by deducting necessary and legally permitted business expenses from revenue. Elements to consider include overhead, financial charges, depreciation, deductible provisions, and prior-period losses. The absence of initial tax credit for exemption years requires prudent planning when crossing above or below the AED 375,000 threshold.

Principal Exemptions

Participation Exemption: Dividends received by a corporation on qualifying participations (at least 5% ownership — or an acquisition cost of at least AED 4 million — held for at least 12 months, with the subsidiary subject to tax of at least 9%) and capital gains from disposal of such participations are exempt (Federal Decree-Law No. 47 of 2022, art. 23; Ministerial Decision No. 116 of 2023).
Group Restructurings: Merger, separation, or group reorganization transactions meeting decree-law criteria benefit from capital gains deferral if certain technical conditions are satisfied.
Subsidiaries of Non-Residents: Subject to conditions, subsidiaries of non-resident corporations operating genuine economic substance in the Emirates may be eligible for certain exemption regimes.
Non-Commercial Entities: Corporations holding only passive investments without active commercial operations may be exempt or subject to special regimes.

The Free Zone Regime (QFZP)

Definition and Eligibility Conditions

The Qualified Free Zone Person (QFZP) regime is a Corporate Tax regime applicable to a Qualifying Free Zone Person meeting the conditions of Article 18 of the Corporate Tax Law and its implementing decisions. It is not a general personal income tax exemption. The rate is 0% on Qualifying Income and 9% on Taxable Income that is not Qualifying Income. Essential conditions include:

Economic Substance and Corporate Tax Law Compliance: Actual physical presence (offices, personnel, equipment) and genuine conduct of commercial activities within the free zone. QFZP status is governed by the conditions of the Corporate Tax Law and its implementing decisions: adequate substance, compliance with Qualifying Income conditions, adherence to the de minimis threshold, audited accounts where required, and general Corporate Tax framework compliance. CIGA registration should not be presented as a standalone condition for QFZP qualification.
Audited Accounts: Bookkeeping per IFRS standards with annual external audit, as required by the Corporate Tax Law and its implementing decisions.
Tax Governance: Documentation of governance mechanisms, business decisions, and intercompany operations in accordance with the Corporate Tax framework.
Transfer Pricing: Documented justification of prices on intercompany transactions per OECD arm's length principles.

QFZP Tax Rate

QFZPs benefit from 0% tax rate on qualifying income and 9% on non-qualifying income. This distinction is critical: income from qualifying activities (see below) is entirely exempt from federal tax, while other income is taxed at the standard rate.

Qualifying Income vs. Non-Qualifying Income

Qualifying Income (0%): Income generated from qualifying activities conducted within the free zone (see list below), excluding externally-sourced income.
Non-Qualifying Income (9%): Dividends from non-QFZP corporations, external financing income, income from services provided outside the free zone, and capital gains from non-operational assets.

De Minimis Rule and Status Loss

The de minimis requirement is satisfied when the non-qualifying revenue derived by the Qualifying Free Zone Person does not exceed 5% of total revenue for the period or AED 5,000,000, whichever is lower (Cabinet Decision No. 100 of 2023, art. 4). If this condition is not met, QFZP status is lost from the beginning of the relevant tax period and for the four subsequent tax periods (Federal Decree-Law No. 47 of 2022, art. 18(3); Cabinet Decision No. 100 of 2023). This rule incentivizes free zones to maintain substantial operational activity and avoid pure financial or holding positioning.

Qualifying Activities (Cabinet Decision No. 100 of 2023 and Ministerial Decision No. 229 of 2025)

Cabinet Decision No. 100 of 2023 and Ministerial Decision No. 229 of 2025 (which replaced Ministerial Decision No. 265 of 2023 with retroactive effect from 1 June 2023) list the activities benefiting from the 0% QFZP rate, including:

Manufacturing, processing and industrial treatment of merchandise.
Investment fund management, venture capital and private equity.
Logistics, warehousing, handling and port operations.
Aircraft and vessel management, chartering and operations.
International trading of raw materials and commodities.
Operational holding and group management.
Engineering services, R&D and technical services.
Exclusive distribution for export outside the UAE.

Excluded Activities from QFZP Regime

Certain activities cannot benefit from QFZP status, notably:

Commercial transactions with individuals resident in the UAE.
Banking services, loans and credit operations.
Insurance and reinsurance.
Real estate (acquisition, leasing, development) outside manufacturing or logistics framework.
Tourism and hospitality services.

Reporting Obligations

FTA Registration

Any entity engaged in economic activity in the UAE must register with the Federal Tax Authority (FTA) within the deadlines specified by taxpayer category per FTA Decision No. 3 of 2024. Corporate Tax registration deadlines cannot be reduced to a uniform 30-day rule from the start of business. They depend on the category of taxpayer and, for many resident juridical persons, on the date of licence issuance, in accordance with clarifications published by the Federal Tax Authority. Failure to register within the prescribed deadlines results in an administrative penalty of AED 10,000 (Cabinet Decision No. 75 of 2023, as amended by Cabinet Decision No. 10 of 2024), subject to the waiver initiative announced by the FTA in 2025 where the first tax return is filed within seven months of the end of the first tax period.

Annual Tax Return

Tax returns must be filed with the FTA within 9 months following the close of the fiscal year (Federal Decree-Law No. 47 of 2022, art. 53), with the tax payable within the same deadline (art. 48). Audited financial statements are required for entities whose revenue exceeds AED 50 million and for all Qualifying Free Zone Persons (Ministerial Decision No. 82 of 2023). Resident businesses with revenue not exceeding AED 3 million may elect for Small Business Relief (Ministerial Decision No. 73 of 2023), without being relieved of the registration and filing obligations.

Administrative Penalties

Cabinet Decision No. 75 of 2023 establishes a comprehensive sanctions regime for non-compliance:

Late registration penalty: AED 10,000 (introduced by Cabinet Decision No. 10 of 2024 amending Cabinet Decision No. 75 of 2023), subject to the FTA waiver initiative where the published conditions are met.
Late return penalty: AED 500 per month (or part thereof) for the first twelve months, then AED 1,000 per month thereafter.
Late payment penalty: 14% per annum, computed monthly on the unpaid tax.
Failure to keep the required records and documents: AED 10,000, increased to AED 20,000 for repeated violations within 24 months.
Penalty for an incorrect tax return not corrected before the filing deadline: AED 500, in addition to any adjustments on audit.

Documentation Obligations

Businesses must retain for 7 years following the end of the relevant tax period (Federal Decree-Law No. 47 of 2022, art. 56):

Complete accounting records and audited financial statements.
Documentation of intercompany operations and transfer pricing.
Evidence of revenues and business expenses.
Justification of exemption elements applied.
Correspondence with tax authorities.

Impact of OECD Pillar Two

DMTT Compliance Declaration

The United Arab Emirates has joined the OECD Pillar Two inclusive solution on taxation of large multinational enterprises. The Domestic Minimum Top-up Tax (DMTT) of 15% applies to fiscal years starting on or after January 1, 2025 per Cabinet Decision No. 142 of 2024. This provision ensures that UAE profits of an in-scope multinational group subject to an effective tax rate below 15% are topped up to a 15% effective rate in the UAE.

Relevance Threshold

The DMTT applies only to multinational groups whose consolidated annual revenue equals or exceeds EUR 750 million in at least two of the four preceding fiscal years (Cabinet Decision No. 142 of 2024). SMEs and small- to medium-sized domestic enterprises are unaffected, preserving UAE attractiveness for mid-sized structures.

Interaction with 9% Tax Rate

For entities operating at federal level in the UAE at 9%, the DMTT rarely presents additional burden unless other group jurisdictions apply lower rates. However, for QFZPs enjoying 0% on qualifying income, Pillar Two may generate additional top-up tax obligation if the group is multinational and sufficiently large.

Individuals and Corporate Tax

Individual Entrepreneurs Subject to Tax

Unlike corporate tax applying to legal entities, individuals are not ordinarily subject to federal corporate tax in the UAE. However, Cabinet Decision No. 49 of 2023 introduced a threshold rule: an individual conducting a business or business activity in the UAE is only subject to corporate tax where the annual turnover derived from that activity exceeds AED 1 million.

Implications for Freelancers and Small Activities

Freelancers, consultants and service providers whose activity remains below the AED 1 million threshold are not subject to federal corporate tax. They remain subject to commercial registration and local licensing fees (Dubai Department of Economic Development or equivalent) but are not fiscally subject to corporate tax.

Heirs and Successors

Upon the death of an individual, heirs who continue economic activity without creating a new legal entity remain subject to individual rules, with application of the AED 1 million threshold. Successors must update their FTA registration.

Key Takeaways

Federal corporate tax of 9% in the UAE from June 1, 2023, with exemption up to AED 375,000 annual profit
QFZP regime 0% for free zones operating qualifying activities and satisfying economic substance
FTA registration obligation and annual return 9 months after fiscal year-end, subject to penalties
DMTT of 15% (OECD Pillar Two, Cabinet Decision No. 142 of 2024) applicable to fiscal years starting from 2025 for groups with consolidated revenue of EUR 750M or more
Individuals not subject to tax until AED 1M annual revenue threshold

Frequently Asked Questions

The federal corporate tax rate is 9% on profits exceeding AED 375,000 annually. Profits below this threshold are not taxed. Free zone entities operating under QFZP status with qualifying activities benefit from a 0% rate on qualifying income.

Corporate Tax registration deadlines depend on the category of taxpayer and, for many resident juridical persons, on the date of licence issuance, in accordance with clarifications published by the Federal Tax Authority. Registration is mandatory and free. Failure to register on time exposes you to an administrative penalty of AED 10,000, subject to subsequent waiver mechanisms where FTA-published conditions are met.

QFZP (Qualified Free Zone Person) is a special tax status offering 0% tax on qualifying income. Eligibility requires: free zone residency, genuine economic substance, IFRS-audited accounts, and operation of qualifying activities listed by authorities (manufacturing, logistics, fund management, etc.).

Qualifying activities include: industrial manufacturing, investment fund management, logistics and warehousing, aircraft and vessel operations, commodity trading, operational holding, engineering and R&D services, and exclusive export distribution. Banking, insurance, tourism and residential real estate are excluded.

The annual tax return must be filed with the FTA within 9 months of fiscal year-end. This applies to all corporations subject to corporate tax, regardless of size (Federal Decree-Law No. 47 of 2022, art. 53). Failure to meet this deadline results in a penalty of AED 500 per month of delay for the first twelve months, then AED 1,000 per month (Cabinet Decision No. 75 of 2023).

The DMTT applies from January 1, 2025 to multinational groups whose consolidated revenue exceeds EUR 750 million. If your entity operates at a rate below 15%, additional top-up tax may apply. SMEs and non-multinational domestic enterprises are not affected.

Corporate Tax in the United Arab Emirates: Rate, Regime and Obligations