Corporate Tax in the United Arab Emirates: Rate, Regime and Obligations
Corporate tax in the UAE applies a 9% flat rate on taxable profits, effective June 1, 2023. Understanding the exemptions, thresholds, free zone regimes (QFZP), and reporting obligations is essential for compliance and optimization.
UAE Corporate Tax applies at 9% on taxable income above AED 375,000. QFZPs may apply 0% to qualifying income, subject to all conditions. Since 2025, the DMTT applies to multinational groups with consolidated revenue of EUR 750 million or more in at least two of the four preceding years; the effective top-up is calculated under the GloBE rules.
UAE Corporate Tax silo contents
This pillar page provides an overview. Each topic has a dedicated page covering the rules, deadlines and best practices in depth.
Legislative Framework
Standard Rate and Exemption Threshold
Under the ordinary regime, taxable income up to AED 375,000 is taxed at 0%, with 9% on the excess; this is not an exemption for the first years of business. Small Business Relief is a separate election: a Resident Person may, subject to conditions, be treated as having no taxable income if revenue does not exceed AED 3 million in the current and relevant preceding periods. QFZPs and members of certain large multinational groups are excluded. Registration and filing remain required. MD 73/2023, amended by MD 131/2026, extends the relief to eligible periods ending no later than 31 December 2029.
Accounting income is the starting point for taxable income. Adjustments under the Corporate Tax Law include expense deductibility, interest limitations, exemptions, transfer pricing and tax-loss rules. An accounting expense is therefore not necessarily immediately deductible.
Principal Exemptions
- Participation exemption: dividends from UAE resident juridical persons have a separate exemption. For foreign participations and relevant gains, Article 23 and MD 302/2024 impose several conditions, including the qualifying interest or acquisition cost, holding period, profit and liquidation entitlements, taxation and asset composition. MD 302/2024 applies to periods beginning on or after 1 January 2025; MD 116/2023 remains relevant for earlier periods. A 5% interest or AED 4 million acquisition cost is not sufficient by itself.
- Group Restructurings: Merger, separation, or group reorganization transactions meeting decree-law criteria benefit from capital gains deferral if certain technical conditions are satisfied.
- UAE subsidiaries of foreign groups: subsidiary status or substance does not create a general exemption. Identify the taxpayer, exempt income and the conditions of any specific regime.
- Holding companies: a holding may earn exempt or qualifying income without itself being an Exempt Person. Registration, filing and other obligations require separate examination.
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
A QFZP applies 0% to Qualifying Income and 9% to taxable income outside that category, without the ordinary AED 375,000 band for the latter. A transaction with a Free Zone Person is assessed by reference to the beneficial-recipient condition and Excluded Activities, among other requirements. A transaction with a Non-Free Zone Person generally needs a non-excluded Qualifying Activity. Permanent establishments, real estate and intellectual property have specific rules. De minimis may bring other revenue into Qualifying Income. A foreign customer’s location does not by itself determine the rate, and a dividend exemption is assessed separately.
Qualifying Income vs. Non-Qualifying Income
- Qualifying Income (0%): the result of classification under CD 100/2023 and MD 229/2025, rather than a list restricted to geographically local income. Foreign revenue is not excluded by nature.
- Non-qualifying taxable income (9%): determined after applying the specific rules and exemptions. Dividends from a non-QFZP, services to foreign clients or financing income must not automatically be assigned to this category.
De Minimis Rule and Status Loss
De minimis is satisfied when non-qualifying revenue does not exceed the lower of 5% of the relevant total revenue and AED 5 million. Numerator and denominator exclusions follow the legislation, notably for specified real-estate and permanent-establishment income. Failure to meet QFZP conditions causes loss of status from the beginning of the relevant period and for the next four periods. Holding securities for investment purposes can itself be a Qualifying Activity.
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 goods or materials.
- Processing goods or materials.
- Trading Qualifying Commodities within the definitions and restrictions of MD 229/2025.
- Holding shares and other securities for investment purposes.
- Ownership, management and operation of Ships within the regulatory definition.
- Regulated reinsurance services.
- Fund management subject to oversight by the Competent Authority.
- Wealth and investment management subject to that oversight.
- Headquarter services to Related Parties.
- Treasury and financing services to Related Parties or for own account.
- Financing and leasing Aircraft within the regulatory scope.
- Distribution of goods or materials in or from a Designated Zone, subject to the import and customer conditions in the legislation.
- Logistics services.
- Activities ancillary to the preceding categories, within MD 229/2025.
Excluded Activities from QFZP Regime
Excluded Activities must be assessed income by income. They do not automatically remove QFZP status if all conditions, including de minimis where relevant, remain satisfied:
- Transactions with natural persons, wherever resident, except the specified Ship, fund management, wealth/investment management and Aircraft financing/leasing activities.
- Banking activities: an offshore licence does not create a general exception.
- Insurance, without prejudice to qualifying reinsurance and the headquarter services specified in the legislation.
- Finance and leasing, subject to the express exceptions for specified commodities, Ships, treasury/financing and Aircraft activities.
- Ownership or exploitation of real estate, except notably specified Commercial Property in a Free Zone transacted with a Free Zone Person; the separate real-estate rules must still be checked.
- Activities ancillary to Excluded Activities.
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. 84 of 2025). Resident businesses with revenue not exceeding AED 3 million may elect for Small Business Relief (Ministerial Decision No. 73 of 2023, as extended by Ministerial Decision No. 131 of 2026), 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
The ordinary UAE 9% rate does not rule out DMTT. For an in-scope group, the computation uses the effective tax rate of the relevant UAE entities, based on GloBE income and adjusted covered taxes, rather than merely the rate in another jurisdiction. Top-up tax is calculated on excess profit after the substance-based income exclusion, with applicable adjustments and safe harbours. A QFZP’s nominal 0% rate therefore does not automatically produce a top-up equal to 15% of all its accounting profit.
Need expert guidance?
Let's discuss your situation
Free 10-minute initial call. Jonathan Sémon responds personally.
Book a consultationIndividuals 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
References
- Federal Decree-Law No. 47 of 2022 (Corporate Tax Law) — Federal Tax Authority
- Cabinet Decision No. 116 of 2022 (AED 375,000 threshold) — UAE Legislation
- Ministerial Decision No. 73 of 2023, as extended by Ministerial Decision No. 131 of 2026 (Small Business Relief) — Ministry of Finance
- Cabinet Decision No. 100 of 2023 (Qualifying Income) — UAE Legislation
- Ministerial Decision No. 229 of 2025 (Qualifying Activities, replacing MD No. 265 of 2023) — Ministry of Finance
- Cabinet Decision No. 75 of 2023 (administrative penalties, as amended by CD No. 10 of 2024) — Ministry of Finance
- Cabinet Decision No. 142 of 2024 (Domestic Minimum Top-up Tax) — Federal Tax Authority
Optimize Your Corporate Tax: A Tailored Strategy
Your tax situation is unique. Whether you operate in a free zone or mainland, exceed the AED 375,000 profit threshold, or are considering restructuring, GEOTAX helps you understand your obligations and identify legal optimization opportunities.
Tax sources and review date
Fiscal review: 5 September 2026. The applicable text and tax period must be checked for each situation.