The UAE corporate tax rate is 9% on taxable income exceeding AED 375,000. The first AED 375,000 is taxed at 0%. Large multinationals with EUR 750 million or more in global revenue face a 15% minimum effective rate under the Domestic Minimum Top-up Tax (DMTT), effective from 1 January 2025.
The UAE introduced federal corporate tax – effective for financial years starting on or after 1 June 2023 – to align with global standards while keeping one of the world’s most competitive business tax environments. It was a landmark shift for a country that had no federal corporate tax for decades.
UAE Corporate Tax Rates for 2025–2026 (at a Glance)
| Rate | Taxable Income Threshold | Applicable To | Effective Date |
| 0% | Up to AED 375,000 | All taxable persons (or those electing Small Business Relief) | 1 June 2023 |
| 9% | Exceeding AED 375,000 | All taxable persons (standard rate) | 1 June 2023 |
| 15% | Minimum effective rate | MNEs with consolidated global revenue ≥ EUR 750m | 1 January 2025 |
What Is UAE Corporate Tax?
Corporate tax (CT) is a federal direct tax levied on the net income or profit of businesses operating in the UAE. For decades, the UAE had no federal corporate tax. Only emirate-level taxes on oil companies and foreign bank branches existed.
That changed with Federal Decree-Law No. 47 of 2022, effective for financial years starting on or after 1 June 2023.
The UAE introduced corporate tax to align with OECD Base Erosion and Profit Shifting (BEPS) standards, meet international tax transparency commitments, diversify government revenue beyond oil, and reinforce the country’s credibility as a global business hub. The UAE introduced corporate tax not to burden businesses, but to meet international standards that protect the country’s reputation as a legitimate, transparent business hub. This credibility benefits every company operating here.
One critical clarification: the UAE does NOT levy personal income tax. Corporate tax applies only to business profits – not to salaries, wages, or personal investment returns.
0% Rate – Small Business Relief
The first AED 375,000 of taxable income is taxed at 0% for all taxable persons. This isn’t an exemption – it’s a rate bracket.
Small Business Relief is a separate mechanism. Businesses with revenue of AED 3 million or less (revenue, not profit) can elect to treat their entire taxable income as zero. That means zero CT liability and reduced compliance burden. This relief is available for tax periods starting before 1 January 2027 – it has an expiry date.
Freelancers on freelance permits, sole proprietors, micro-businesses, and early-stage startups benefit most.
Worked example – Small Business Relief
A management consultancy with AED 2.4 million annual revenue elects Small Business Relief. Taxable income is treated as zero, CT liability is AED 0, and the entity files a simplified return. The relief expires for tax periods starting on or after 1 January 2027, so plan ahead if you currently rely on it.
9% Standard Rate
The 9% rate applies to taxable income exceeding AED 375,000. This is the rate the vast majority of UAE businesses will pay. It’s a flat 9% on the portion above AED 375,000, not 9% on total income.
At 9%, the UAE’s corporate tax rate is less than half the OECD average of approximately 23.5% and significantly lower than the UK (25%), US (21% federal), Germany (~30%), India (25.17%), and France (25%).
| Country | Standard Corporate Tax Rate |
| UAE | 9% |
| Singapore | 17% |
| Hong Kong | 16.5% |
| US | 21% (federal) |
| UK | 25% |
| India | 25.17% |
| Germany | ~30% |
| France | 25% |
If you’re a freelancer earning AED 200,000/year, you fall in the 0% bracket. If you’re running a consultancy billing AED 3 million/year, the 9% rate applies to everything above AED 375,000.
15% Rate – Domestic Minimum Top-up Tax (DMTT)
Effective for financial years starting on or after 1 January 2025, the UAE introduced a Domestic Minimum Top-up Tax aligned with the OECD’s Pillar Two Global Anti-Base Erosion (GloBE) Rules. This applies only to multinational enterprise (MNE) groups with consolidated global revenue of EUR 750 million or more in at least two of the four preceding fiscal years.
The DMTT ensures these large MNEs pay a minimum effective tax rate of 15% on their UAE profits.
If your business is not part of an MNE group with EUR 750 million+ in global revenue, the DMTT does not apply to you. The vast majority of UAE businesses — including SMEs, startups, and mid-market companies – are subject only to the 0%/9% rate structure.
Who Is Subject to UAE Corporate Tax?
UAE corporate tax applies to three broad categories of taxpayers.
Resident Juridical Persons
- Companies incorporated or established in the UAE – mainland LLCs, sole establishments, civil companies, and partnerships (unless treated as fiscally transparent)
- Companies incorporated outside the UAE but effectively managed and controlled from the UAE (meaning key management and commercial decisions are made here)
Both mainland and free zone companies are resident juridical persons. Free zone companies ARE subject to UAE corporate tax. Free zone status does not exempt a company from being a taxable person, it may qualify for a 0% rate on qualifying income, but it’s still within scope.
Non-Resident Persons
Foreign entities can be subject to UAE CT in two scenarios:
- They have a Permanent Establishment (PE) in the UAE – a fixed place of business through which the entity conducts its activities
- They earn UAE-sourced income not attributable to a PE
PE examples include an office, branch, factory, building site exceeding 6 months, or a dependent agent habitually concluding contracts on behalf of the entity.
The current withholding tax rate on UAE-sourced income is 0%. In practice, non-residents without a PE face no UAE tax liability on such income but this rate could change via Cabinet Decision.
Natural Persons (Freelancers & Sole Proprietors)
If you operate as a freelancer, sole proprietor, or individual conducting business in the UAE, corporate tax may apply to you. Natural persons are subject to CT only if their total turnover from business or business activity exceeds AED 1 million in a calendar year.
What’s NOT included: employment income (salary from an employer), personal investment income (dividends, capital gains, interest from personal holdings), and real estate income (unless conducted through a licensed business).
Who Is Exempt from UAE Corporate Tax?
While most businesses fall within the scope of UAE corporate tax, certain categories of entities are fully exempt. The UAE corporate tax exemptions fall into two groups.
Automatically Exempt Entities
- UAE federal and emirate governments and their departments, authorities, and agencies
- Government-controlled entities specifically listed by Cabinet Decision
- Extractive businesses (oil and gas companies), already subject to existing emirate-level corporate taxation
- Non-extractive natural resource businesses, similarly subject to emirate-level taxation
Entities Exempt Upon Application
- Qualifying public benefit entities – charities and non-profit organisations approved by Cabinet Decision
- Qualifying investment funds – must meet conditions including diversity of ownership, regulatory oversight, and fund manager independence
- Public and private pension or social security funds – must be established for the benefit of employees or the public
- Juridical persons wholly owned and controlled by an exempt entity – the parent must itself be exempt, and the subsidiary must support the parent’s exempt purpose
If your entity falls into one of these categories, you must actively apply to the FTA for exempt status. Without approval, you are treated as a taxable person.
Free Zone Corporate Tax Rules
Operating in a UAE free zone does not automatically exempt your business from corporate tax. This is the most common misconception we encounter.
Free zone companies can benefit from a 0% corporate tax rate on Qualifying Income, but only if they meet all conditions to be classified as a Qualifying Free Zone Person (QFZP). Any income that doesn’t qualify is taxed at the standard 9%.
How to Calculate UAE Corporate Tax
Understanding the rate is one thing. Calculating your actual tax liability is another. Here’s a step-by-step walkthrough.
Step 1 – Determine Your Accounting Income
Start with the net profit (or loss) as reported in your financial statements. UAE corporate income tax uses accounting income as the starting point. Your financial statements should be prepared in accordance with IFRS or IFRS for SMEs, as accepted in the UAE.
Step 2 – Apply Tax Adjustments
Add back non-deductible expenses:
- Fines and penalties
- Donations exceeding the allowable limit
- Entertainment expenses exceeding 50% of the total
- Personal expenses of owners/shareholders
- Expenses not incurred wholly and exclusively for business purposes
- Related-party payments not at arm’s length
Subtract exempt income:
- Qualifying dividends
- Capital gains from qualifying shareholdings
- Foreign PE income (if election made)
- Intra-group transfers at no gain/no loss
Step 3 – Arrive at Taxable Income
After applying all adjustments, you arrive at your taxable income. If you have tax losses carried forward from prior periods, you can offset up to 75% of your current taxable income with those losses. The resulting figure is your final taxable income.
Step 4 – Apply the Tax Rate
Apply the 0% rate to the first AED 375,000 of taxable income (tax = AED 0). Apply the 9% rate to every dirham above AED 375,000.
Exempt Income Under UAE Corporate Tax
Participation Exemption (Dividends & Capital Gains)
If your UAE company owns shares in another company, dividends and capital gains from that shareholding may be fully exempt from UAE corporate tax. The conditions:
- Ownership of 5% or more of the shares (or a minimum acquisition cost of AED 4 million)
- Holding period of at least 12 months
- The subsidiary must be subject to a minimum 9% tax rate (or equivalent) in its jurisdiction
- Domestic dividends from UAE resident companies are generally exempt without meeting the above ownership/holding conditions
Foreign Permanent Establishment Income
If your UAE company has a branch or permanent establishment in a foreign country, you can elect to exempt the income attributable to that foreign PE from UAE corporate tax. This prevents double taxation. The election is irrevocable, the foreign PE must be subject to tax in its jurisdiction at a rate of at least 9%.
Other Exempt Income
- Intra-qualifying group transfers: Assets transferred between companies in the same qualifying group can be treated at no gain/no loss for CT purposes
- Qualifying restructuring transactions: Business restructurings (mergers, spin-offs) meeting prescribed conditions can be completed without triggering a CT liability
Transfer Pricing Rules in the UAE
If your business transacts with related parties — whether a parent company, subsidiary, sister company, or a connected person, UAE corporate tax law requires these transactions to be conducted at arm’s length. That means at prices and on terms that independent parties would agree to in comparable circumstances.
Documentation requirements – businesses meeting certain thresholds must prepare a Master File and Local File. These are detailed reports justifying that your related-party transactions are priced fairly.
Disclosure Form – all taxpayers must submit a related-party disclosure form as part of their annual CT return, regardless of size.
Penalties – non-compliance with transfer pricing rules can result in significant penalties and adjustments to taxable income.
Transfer pricing is one of the most scrutinised areas of corporate tax in the UAE. The FTA has signalled that transfer pricing audits will be a priority, making proper documentation essential from day one.
Businesses should ensure their corporate tax structure, filings and compliance processes are handled correctly to avoid FTA penalties and maintain tax efficiency in the UAE.
Frequently Asked Questions About the UAE Corporate Tax Rate
What is the corporate tax rate in the UAE for 2025–2026?
The UAE has a three-tier structure: 0% on taxable income up to AED 375,000, 9% on income exceeding AED 375,000, and 15% for large MNEs with EUR 750 million or more in global revenue under the DMTT effective from 1 January 2025. These rates apply to financial years starting on or after 1 June 2023.
Does Dubai have corporate tax?
Yes. Corporate tax is a federal UAE tax that applies across all seven emirates, including Dubai. Before the federal CT law, Dubai had no corporate tax except for oil companies and foreign bank branches. Since 1 June 2023, all businesses in Dubai are subject to the federal CT regime.
Is there personal income tax in the UAE?
No. The UAE does not levy personal income tax on employment income, investment income, or any other personal income. Corporate tax applies only to business profits. However, natural persons (freelancers, sole proprietors) conducting business with turnover exceeding AED 1 million may be subject to corporate tax on their business income.
Are free zone companies exempt from UAE corporate tax?
Not automatically. Free zone companies can benefit from a 0% rate on Qualifying Income if they meet all conditions to be a Qualifying Free Zone Person (QFZP), including adequate substance, transfer pricing compliance, and audited financial statements. Non-qualifying income is taxed at 9%. All conditions must be met simultaneously.
When is the UAE corporate tax return due?
Within 9 months from the end of the relevant tax period. If your financial year ends 31 December 2025, your CT return and payment are due by 30 September 2026. Late filing carries a penalty of AED 500 per month for the first 12 months and AED 1,000 per month from month 13 onwards (Cabinet Decision No. 75 of 2023). Late payment also accrues interest at 14% per annum on the unpaid tax.
