# UAE Corporate Tax Rate 2025–2026: Complete Guide to Rates and Exemptions The UAE corporate tax rate is **9% on taxable income exceeding AED 375,000**. The first AED 375,000 of taxable income is taxed at **0%**. Large multinational enterprise groups with **EUR 750 million or more in consolidated global revenue** are subject to a **15% minimum effective tax rate** under the Domestic Minimum Top-up Tax (DMTT), effective from **1 January 2025**. The UAE introduced federal corporate tax for financial years starting on or after **1 June 2023**. This marked a major shift for a country that historically had no broad federal corporate tax, while preserving one of the world’s most competitive business tax environments. ## UAE Corporate Tax Rates for 2025–2026 | Rate | Taxable Income Threshold | Applicable To | Effective Date | |---|---:|---|---| | 0% | Up to AED 375,000 | All taxable persons, or businesses electing Small Business Relief | 1 June 2023 | | 9% | Exceeding AED 375,000 | All taxable persons under the standard rate | 1 June 2023 | | 15% | Minimum effective rate | MNE groups with consolidated global revenue of EUR 750 million or more | 1 January 2025 | ## What Is UAE Corporate Tax? Corporate tax is a federal direct tax levied on the net income or profit of businesses operating in the UAE. Before the introduction of federal corporate tax, the UAE generally did not levy corporate tax except for certain emirate-level taxes on oil companies and foreign bank branches. This changed under **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 standards - Meet international tax transparency commitments - Diversify government revenue beyond oil - Reinforce the UAE’s credibility as a transparent global business hub A key clarification: **the UAE does not levy personal income tax**. Corporate tax applies to business profits, not salaries, wages, or personal investment returns. ## 0% Rate and Small Business Relief The first **AED 375,000 of taxable income** is taxed at **0%** for all taxable persons. This is not an exemption; it is a tax rate bracket. Small Business Relief is a separate mechanism. Businesses with **revenue of AED 3 million or less** can elect to treat their entire taxable income as zero, resulting in no corporate tax liability and a reduced compliance burden. Small Business Relief is available for tax periods starting **before 1 January 2027**. It is particularly relevant for: - Freelancers on freelance permits - Sole proprietors - Micro-businesses - Early-stage startups ### Example: Small Business Relief A management consultancy has annual revenue of AED 2.4 million and elects Small Business Relief. Its taxable income is treated as zero, its corporate tax liability is AED 0, and it files a simplified return. However, because the relief expires for tax periods starting on or after 1 January 2027, businesses relying on it should plan ahead. ## 9% Standard Corporate Tax Rate The **9% standard rate** applies to taxable income exceeding AED 375,000. This means the 9% rate applies only to the portion above AED 375,000, not to total income. For example: - A freelancer earning AED 200,000 per year falls within the 0% bracket. - A consultancy billing AED 3 million per year is taxed at 9% on taxable income above AED 375,000. At 9%, the UAE’s corporate tax rate remains significantly lower than many major jurisdictions. | Country | Standard Corporate Tax Rate | |---|---:| | UAE | 9% | | Singapore | 17% | | Hong Kong | 16.5% | | United States | 21% federal | | United Kingdom | 25% | | India | 25.17% | | Germany | Approximately 30% | | France | 25% | ## 15% Domestic Minimum Top-up Tax From financial years starting on or after **1 January 2025**, the UAE applies a Domestic Minimum Top-up Tax aligned with the OECD Pillar Two Global Anti-Base Erosion rules. The DMTT applies only to multinational enterprise groups with consolidated global revenue of **EUR 750 million or more** in at least two of the four preceding fiscal years. The purpose is to ensure that large MNE groups pay a minimum effective tax rate of **15%** on their UAE profits. For most UAE businesses — including SMEs, startups, and mid-market companies — the DMTT does not apply. These businesses remain subject to the 0% and 9% corporate tax rate structure. ## Who Is Subject to UAE Corporate Tax? UAE corporate tax applies to three broad categories of taxpayers. ## Resident Juridical Persons Resident juridical persons include: - Companies incorporated or established in the UAE, including 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 Mainland and free zone companies are both resident juridical persons. A free zone company is still within the UAE corporate tax regime. Free zone status does not automatically exempt a company from corporate tax. A free zone company may qualify for a 0% rate on qualifying income, but it remains a taxable person. ## Non-Resident Persons Foreign entities may be subject to UAE corporate tax if they: - Have a **Permanent Establishment** in the UAE - Earn **UAE-sourced income** that is not attributable to a Permanent Establishment Examples of a Permanent Establishment include: - An office - A branch - A factory - A building site lasting more than six months - 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 Permanent Establishment generally have no UAE tax liability on such income, although this rate could change by Cabinet Decision. ## Natural Persons: Freelancers and Sole Proprietors Individuals conducting business in the UAE may be subject to corporate tax. Natural persons are subject to UAE corporate tax only if their total turnover from business or business activity exceeds **AED 1 million** in a calendar year. The following are not included: - Employment income, such as salary from an employer - Personal investment income, including dividends, capital gains, and interest from personal holdings - Real estate income, unless conducted through a licensed business ## Who Is Exempt from UAE Corporate Tax? Most businesses fall within the UAE corporate tax regime, but certain entities are exempt. ## Automatically Exempt Entities The following are automatically exempt: 1. UAE federal and emirate governments, including their departments, authorities, and agencies 2. Government-controlled entities specifically listed by Cabinet Decision 3. Extractive businesses, such as oil and gas companies already subject to emirate-level corporate taxation 4. Non-extractive natural resource businesses that are similarly subject to emirate-level taxation ## Entities Exempt Upon Application Some entities must apply to the Federal Tax Authority for exempt status, including: - Qualifying public benefit entities, such as approved charities and non-profit organisations - Qualifying investment funds that meet conditions including diversity of ownership, regulatory oversight, and fund manager independence - Public and private pension or social security funds established for employees or the public - Juridical persons wholly owned and controlled by an exempt entity, where the subsidiary supports the parent’s exempt purpose If approval is not obtained from the FTA, the entity is treated as a taxable person. ## Free Zone Corporate Tax Rules Operating in a UAE free zone does not automatically exempt a business from corporate tax. Free zone companies may benefit from a **0% corporate tax rate on Qualifying Income** if they meet all conditions to be classified as a **Qualifying Free Zone Person**. Income that does not qualify is taxed at the standard **9%** rate. To benefit from the 0% rate, free zone businesses must ensure that all applicable conditions are satisfied, including compliance with transfer pricing requirements and maintaining appropriate documentation. ## How to Calculate UAE Corporate Tax ## Step 1: Determine Accounting Income Start with the net profit or loss reported in the financial statements. UAE corporate tax uses accounting income as the starting point. Financial statements should be prepared in accordance with IFRS or IFRS for SMEs, as accepted in the UAE. ## Step 2: Apply Tax Adjustments Certain expenses must be added back because they are not deductible for corporate tax purposes. Examples include: - Fines and penalties - Donations exceeding the allowable limit - Entertainment expenses exceeding 50% of the total - Personal expenses of owners or shareholders - Expenses not incurred wholly and exclusively for business purposes - Related-party payments that are not at arm’s length Certain exempt income may be subtracted, including: - Qualifying dividends - Capital gains from qualifying shareholdings - Foreign Permanent Establishment income, if an election is made - Intra-group transfers treated on a no-gain, no-loss basis ## Step 3: Arrive at Taxable Income After tax adjustments, the result is taxable income. If tax losses are carried forward from prior periods, they can be offset against up to **75%** of current taxable income. The remaining amount is the final taxable income. ## Step 4: Apply the Tax Rate Apply: - 0% to the first AED 375,000 of taxable income - 9% to taxable income above AED 375,000 ## Exempt Income Under UAE Corporate Tax ## Participation Exemption: Dividends and Capital Gains If a UAE company owns shares in another company, dividends and capital gains from that shareholding may be exempt from UAE corporate tax if the relevant conditions are met. The conditions include: - Ownership of at least **5%** of the shares, or a minimum acquisition cost of AED 4 million - A holding period of at least **12 months** - The subsidiary being 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 and holding conditions. ## Foreign Permanent Establishment Income If a UAE company has a branch or Permanent Establishment in another country, it may elect to exempt the income attributable to that foreign Permanent Establishment from UAE corporate tax. This helps prevent double taxation. The election is irrevocable, and the foreign Permanent Establishment must be subject to tax in its jurisdiction at a rate of at least 9%. ## Other Exempt Income Other categories of exempt or relieved income include: - Intra-qualifying group transfers, where assets are transferred between companies in the same qualifying group on a no-gain, no-loss basis - Qualifying restructuring transactions, such as mergers or spin-offs that meet prescribed conditions ## Transfer Pricing Rules in the UAE Businesses that transact with related parties must ensure those transactions are conducted at **arm’s length**. This means pricing and terms should match what independent parties would agree to in comparable circumstances. Related parties may include: - Parent companies - Subsidiaries - Sister companies - Connected persons Businesses meeting certain thresholds must prepare transfer pricing documentation, including a Master File and Local File. All taxpayers must submit a related-party disclosure form as part of their annual corporate tax return, regardless of size. Non-compliance can result in penalties and adjustments to taxable income. Transfer pricing is expected to remain a highly scrutinised area, making proper documentation essential. ## Frequently Asked Questions ## What is the corporate tax rate in the UAE for 2025–2026? The UAE corporate tax structure is: - 0% on taxable income up to AED 375,000 - 9% on taxable income exceeding AED 375,000 - 15% minimum effective tax rate for large MNE groups with EUR 750 million or more in global revenue under the DMTT The 0% and 9% rates apply for financial years starting on or after 1 June 2023. The DMTT applies from 1 January 2025. ## Does Dubai have corporate tax? Yes. Corporate tax is a federal UAE tax and applies across all seven emirates, including Dubai. Before federal corporate tax, Dubai generally had no corporate tax except for oil companies and foreign bank branches. Since 1 June 2023, businesses in Dubai fall within the federal corporate tax regime. ## Is there personal income tax in the UAE? No. The UAE does not levy personal income tax on employment income, personal investment income, or other personal income. Corporate tax applies to business profits. However, natural persons such as freelancers and sole proprietors may be subject to corporate tax if their business turnover exceeds AED 1 million in a calendar year. ## 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 treated as a Qualifying Free Zone Person. These conditions include adequate substance, transfer pricing compliance, and audited financial statements. Non-qualifying income is taxed at 9%. ## When is the UAE corporate tax return due? A UAE corporate tax return and payment are due within **9 months** from the end of the relevant tax period. For example, if the financial year ends on 31 December 2025, the corporate tax return and payment are due by 30 September 2026. Late filing penalties are: - AED 500 per month for the first 12 months - AED 1,000 per month from the 13th month onward Late payment also accrues interest at **14% per annum** on unpaid tax.