Corporate Tax in the UAE: A Step-by-Step Guide

As of June 1, 2023, the UAE has officially implemented its corporate tax regime. Businesses — and in some cases individuals — are now required to pay 9% tax on profits exceeding AED 375,000 per year. Anything below that threshold is exempt.

The tax applies to both local and international entities registered in the UAE. Even if you're operating in a Free Zone and counting on a 0% rate, registration with the Federal Tax Authority (FTA) is still mandatory.

Corporate tax in the UAE is administered by several key authorities:

• UAE Ministry of Finance (MoF) — defines tax policy and makes key decisions.
• Federal Tax Authority (FTA) — registers taxpayers, accepts returns, conducts audits, and issues guides and clarifications.
• Emirates Economic Development Departments — oversee business activities at the emirate level.
• Free Zones — offer tax regimes but operate within the federal legal framework.

If you're on the Mainland:
A 9% tax applies to taxable income exceeding AED 375,000. Income is calculated based on financial statements, adjusted for deductions, losses, and reliefs.

If you're in a Free Zone:
A 0% rate may apply if the following conditions are met:

1. You earn qualifying income;
2. You transact only with other Free Zones or non-UAE entities (not mainland);
3. You maintain a physical presence in the UAE and follow Free Zone rules.

📌 Qualifying income refers to income from activities approved by the UAE Cabinet and earned within the Free Zone or from foreign clients. The list is outlined in Cabinet Decision No. 265 of 2023.

Corporate tax is paid annually. After the end of the financial year, the business has 9 months to submit its return and pay any tax due.

Example: If your financial year ends on March 31, 2024 — the deadline is December 31, 2024.

For companies whose first tax period ended before February 29, 2024, the same deadline applies — December 31, 2024 (per FTA Decision No. 7 of 2024).

All legal entities, except those exempt under the law, must register for corporate tax. This includes resident and non-resident entities with a permanent establishment or nexus in the UAE. Individuals must register once their annual revenue exceeds AED 1,000,000.

Here’s how it works:

• Resident legal entities: If the license was issued before March 1, 2024 — register according to the official schedule (e.g., January license = register by May 31). If after March 1 — register within 3 months.
• Non-resident legal entities: Register within 3 to 9 months depending on the form of presence (nexus or permanent establishment).
• Resident individuals: Register by March 31 of the following year if income exceeds AED 1 million.
• Non-resident individuals: Register within 3 months after exceeding the income threshold.

Registration is through the EmaraTax portal. Even if you already have a VAT number, a separate registration is required for corporate tax.
After registration, you'll receive a Tax Registration Number to be used in your corporate tax return. If your registration details change, notify the FTA within 20 working days.

Small businesses and other taxpayers in the UAE can benefit from several reliefs:

• Small Business Relief is available if annual revenue does not exceed AED 3 million.
• Expenses incurred to earn income — such as depreciation, interest, and license fees — can be deducted.
• Certain income may be exempt, such as dividends from subsidiaries or profits from foreign permanent establishments, if the law’s requirements are met.

Full conditions are set out in Federal Decree-Law No. 47 of 2022 and Cabinet Decisions, and are explained in Real Law’s “Small Business Relief” guide.

To understand corporate tax in the UAE, it’s important to know these documents:

• Federal Decree-Law No. 47 of 2022 — the main corporate tax law;
• Federal Decree-Laws No. 60 (2023) and No. 40 (2024) — amendments to the main law;
• Cabinet Decisions and Ministerial Decisions — clarify what qualifies as income, exemptions, and penalties;
• FTA Guides — explain registration, tax returns, income calculation, transfer pricing, and more.

The UAE has a clear and strict penalty system:

• Inadequate recordkeeping: AED 10,000 per violation; AED 20,000 for repeated violations within 24 months
• Failure to submit information or documents upon request: AED 5,000
• Late deregistration: AED 1,000 for each month of delay, up to AED 10,000
• Failure to notify the FTA of changes to tax information: AED 1,000; AED 5,000 for repeat offenses within 24 months
• Late filing of a tax return: AED 500 for the first month; AED 1,000 for each subsequent month
• Late payment of tax: 14% annual interest on overdue amounts
• Obstruction of a tax audit: AED 20,000

Still have questions about corporate tax?

• Registration process?
• Tax calculation in Free Zones or Mainland?
• Eligibility for Small Business Relief?
• Choosing the right tax period?
• How to file your tax return?

You’ll find all the answers — plus original documents and detailed instructions — on Real Law. Request a demo and get 3 days of free access to all materials.