In the UAE, company profit is taxed on a two-tier scale: 0% on the first AED 375,000 of taxable profit and 9% on every dirham above it. So a business with AED 500,000 of taxable profit is taxed only on AED 125,000 — that is AED 11,250, an effective rate of just 2.25%. Almost every UAE company must register for corporate tax, yet many pay nothing: two legal routes — Small Business Relief and Qualifying Free Zone status — can bring the effective rate to 0%. Here is exactly how the threshold works and who qualifies.
Who pays the 9% UAE corporate tax
Federal corporate tax (CT) has applied across the UAE for financial years starting on or after 1 June 2023, under Federal Decree-Law No. 47 of 2022. It is administered by the Federal Tax Authority (FTA), with policy set by the Ministry of Finance (MoF). The 9% rate is one of the lowest headline corporate tax rates in the world, and it reaches a clearly defined set of “taxable persons”:
- Mainland companies — UAE-incorporated LLCs, PJSCs and other legal entities, on their worldwide taxable income.
- Free zone companies — every free zone entity sits inside the CT system and must register, even if it ultimately qualifies for the 0% Free Zone rate (more below).
- Branches of domestic and foreign companies operating in the UAE.
- Resident individuals running a business — a natural person is taxed only where total annual turnover from business or commercial activity exceeds AED 1,000,000. Salary, employment income, personal investment and personal real-estate income stay outside CT.
- Non-residents with a permanent establishment or UAE-sourced income, on the relevant portion.
The taxable base itself is IFRS accounting profit, adjusted for items the law defines — exempt income, disallowed expenses, and so on.
The AED 375,000 threshold: a worked example
The threshold is a band, not a cliff. The first AED 375,000 of taxable profit is always taxed at 0%; only the portion above it is charged at 9% — which keeps the effective rate well below 9% for most small and mid-sized firms:
| Taxable profit (AED) | Taxed at 0% (first 375,000) | Taxed at 9% (excess) | Corporate tax due (AED) | Effective rate |
|---|---|---|---|---|
| 300,000 | 300,000 | 0 | 0 | 0% |
| 375,000 | 375,000 | 0 | 0 | 0% |
| 500,000 | 375,000 | 125,000 | 11,250 | 2.25% |
| 1,000,000 | 375,000 | 625,000 | 56,250 | 5.63% |
| 2,000,000 | 375,000 | 1,625,000 | 146,250 | 7.31% |
Take the AED 500,000 example: the first AED 375,000 is taxed at 0%, leaving AED 125,000 in the 9% band, so AED 125,000 × 9% = AED 11,250 — an effective rate of 2.25%, not 9%. As profit grows, the effective rate edges toward 9% but never reaches it, because that first AED 375,000 is always free.
Small Business Relief: 0% if revenue is under AED 3 million
Small Business Relief (SBR) is the most direct route to a zero liability. Under Ministerial Decision No. 73 of 2023, a UAE resident whose revenue is AED 3,000,000 or less in the current and every previous tax period may elect to be treated as having no taxable income — meaning no corporate tax is due, however profitable the year was.
Two points matter. First, SBR is elective: you must actively claim it in your tax return — it is not automatic. Second, relief from tax is not relief from compliance. Even with SBR, you must still register for corporate tax, file a return for each period, and keep proper accounting records.
SBR is also time-limited: it is available only for tax periods ending on or before 31 December 2026. Unless the Ministry extends it, periods beginning in 2027 fall back to the standard 0% / 9% treatment — so businesses near the AED 3 million line should plan for that transition rather than be surprised by a first 9% bill.
Free zone companies: the 0% QFZP route
Free zones did not lose their tax advantage — but the 0% rate is now conditional. A free zone entity that meets a strict test becomes a Qualifying Free Zone Person (QFZP) and pays 0% on its “Qualifying Income”, with 9% applying only to any income that is not qualifying. To hold QFZP status, a company must:
- maintain adequate substance in the free zone — real people, premises and activity, not a nameplate;
- earn qualifying income from qualifying activities (broadly, dealings with other free zone persons and defined categories of international business);
- comply with UAE transfer pricing rules and documentation;
- prepare audited financial statements under IFRS;
- stay within the de minimis limit — non-qualifying revenue must not exceed the lower of AED 5 million or 5% of total revenue.
Breach any core condition — for example, exceed the de minimis limit — and the company loses QFZP status for that tax period and the following four: five tax periods in total, taxed at the standard 9% above AED 375,000. In short, the 0% free zone rate is real, but it has to be earned and defended every year with substance, audited accounts and clean transfer pricing.
DMTT 15%: only for the largest multinationals
The “15%” figure in some headlines is the Domestic Minimum Top-up Tax (DMTT) — the UAE’s version of the OECD Pillar Two global minimum tax. It applies only to multinational groups with consolidated global revenue of at least EUR 750 million, for financial years starting on or after 1 January 2025. Below that threshold, where the vast majority of UAE businesses sit, DMTT does not touch you and your rate stays 0% / 9%.
Deadlines, registration and penalties
Registration is mandatory for every taxable person, including free zone companies and businesses that expect to pay nothing. You register once, through the FTA’s EmaraTax portal, and receive a Corporate Tax Registration Number.
The return and payment are due within nine months of the end of your tax period — one return and one payment a year, with no advance instalments. A company whose financial year ended on 31 December 2025 must therefore file and pay by 30 September 2026.
Missing the registration deadline triggers an AED 10,000 penalty. The FTA and MoF, however, introduced a waiver: the penalty is cancelled if the business files its first corporate tax return (or annual declaration) within seven months of the end of its first tax period, rather than the usual nine. If you registered late, filing early is the way to erase the fine.
The bottom line: your checklist
Once the threshold logic clicks, the UAE’s 9% corporate tax is straightforward: a free first AED 375,000, 9% above, two legal doors to 0%. Before your deadline, run this checklist:
- Register for corporate tax on EmaraTax — mandatory even at a 0% liability.
- Confirm your tax period and mark the deadline nine months after it ends (31 Dec 2025 → 30 Sep 2026).
- Check Small Business Relief if your revenue is AED 3 million or less — and remember to elect it, for periods ending by 31 Dec 2026.
- Test the QFZP conditions if you are in a free zone: substance, qualifying income, transfer pricing, audited IFRS accounts and the de minimis limit.
- Keep records and file on time — filing your first return within seven months can waive the AED 10,000 late-registration penalty.
- Confirm the figures with the FTA before you act.
This article is for general information only and is not tax or legal advice. Corporate tax outcomes depend on your specific circumstances, and the rules can change. Always verify the current position with the UAE Federal Tax Authority (FTA) and the Ministry of Finance, or consult a qualified adviser, before making decisions. Official guidance: tax.gov.ae.
