Corporate Tax in the UAE

Updated On : Jan 2026 | 15 min read

The UAE introduced a federal corporate tax regime in June 2023, marking a major change in how businesses operating in the country are taxed. The framework is designed to support economic growth, align with international tax standards, and maintain the UAE’s position as an attractive global hub for investment and enterprise.

This guide explains how the UAE corporate tax system works, who is subject to the tax, how taxable income is calculated and how the Domestic Minimum Top-up Tax will affect large multinational groups.

Understanding Corporate Tax in the UAE

Corporate tax is a levy applied on the profits generated by business activities. The rules apply to both UAE-based companies and foreign businesses operating within the country.

Income earned from employment or personal investments is not treated as business income and therefore falls outside the corporate tax scope.

Who Is Taxable under the UAE Corporate Tax Law

Corporate tax liability depends on the type of entity and its economic connection to the UAE.

1. Resident Juridical Persons – Companies incorporated under UAE law, including mainland and free zone entities.
2. Resident Natural Persons – Individuals conducting business with annual turnover exceeding AED 1 million.
3. Non-Residents – Foreign businesses with a permanent establishment, UAE-sourced income or economic nexus within the UAE.

Corporate Tax Rates in the UAE

The UAE applies a progressive tax structure based on profit thresholds.

1. 0% on taxable income up to AED 375,000
2. 9% on taxable income above AED 375,000

These rates apply to both companies and natural persons engaged in business activities within the UAE.

Qualifying Free Zone Persons

Free zone companies that meet substance requirements may benefit from a zero percent tax rate on qualifying income. Non-qualifying income remains subject to the standard nine percent rate.

Domestic Minimum Top-up Tax

From 2025 the UAE will introduce a Domestic Minimum Top-up Tax for multinational groups with consolidated global revenues exceeding EUR 750 million in at least two of the previous four financial years.

This ensures such groups pay a minimum effective tax rate of fifteen percent in line with the OECD Pillar Two global tax framework.

Entities Exempt from Corporate Tax

1. Government entities and government controlled organisations
2. Extractive and natural resource businesses
3. Public benefit organisations
4. Pension and social security funds
5. Qualifying investment funds

Small businesses may also qualify for temporary relief when their revenue remains below AED 3 million until the end of 2026.

How Taxable Income Is Determined

Taxable income is calculated starting with accounting profit reported in financial statements prepared according to IFRS standards.

Adjustments are then made to remove exempt income and add back non-deductible expenses before applying the applicable tax rates.

Transfer Pricing Requirements

Businesses engaging in transactions with related parties must comply with the arm’s length principle. Prices must reflect market conditions.

Larger multinational groups must prepare detailed documentation including a local file and master file to demonstrate compliance.

Corporate Tax Compliance Obligations

1. Register with the Federal Tax Authority
2. Obtain a corporate tax registration number
3. File annual tax returns
4. Maintain proper accounting records and supporting documentation

Tax returns must be submitted within nine months after the end of the financial year.

Calculating Corporate Tax – Example

If a company reports net profit of AED 750,000 and AED 50,000 of expenses are not deductible, the adjusted taxable income becomes AED 700,000.

The first AED 375,000 is taxed at 0% and the remaining AED 325,000 is taxed at 9%, resulting in corporate tax of AED 29,250.

Conclusion

The UAE corporate tax system introduces a modern and internationally aligned framework that supports transparency and long-term economic development.

Businesses must ensure accurate financial reporting, maintain proper records and comply with filing obligations while preparing for the introduction of the Domestic Minimum Top-up Tax.

Many organisations are adopting digital platforms such as Accqrate to simplify compliance, maintain structured financial data and improve the reliability of tax reporting processes.