The United Arab Emirates (UAE) has attracted global businesses with its strategic location, advanced infrastructure, and supportive business environment. The introduction of the federal corporate tax in 2023 marked a significant change, aligning the UAE with international tax standards while preserving its competitiveness. As of 2026, the corporate tax regime has evolved with minor updates to enhance compliance and transparency.
This guide provides essential information on corporate tax in the UAE, including rates, exemptions, filing requirements, and recent changes. Understanding these rules is crucial for both new and established businesses.
What is Corporate Tax in the UAE?
Corporate tax (CT) is a federal tax levied on the net income or profits of corporations and businesses operating in the UAE. Introduced under Federal Decree-Law No. 47 of 2022, it applies to financial years starting on or after June 1, 2023. The tax aims to diversify the economy, support sustainable development, and adhere to global best practices, such as those of the OECD. Unlike the value-added tax (VAT), which is an indirect tax, corporate tax is a direct tax on business earnings.
Key objectives include:
- Promoting transparency and fairness in taxation.
- Encouraging investment while ensuring large multinationals contribute appropriately.
- Maintaining the UAE’s appeal as a low-tax jurisdiction compared to global averages.
Who is Subject to Corporate Tax?
Corporate tax applies to various entities, though not all businesses are subject to it. The following outlines the main categories:
Taxable Persons
- Juridical Persons: This includes UAE-incorporated companies (e.g., LLCs, PSCs), foreign companies with a permanent establishment (PE) in the UAE, and free zone entities.
- Natural Persons: Individuals conducting business activities with an annual turnover exceeding AED 1 million.
- Foreign Entities: Those managed and controlled in the UAE or with a PE, such as a fixed place of business or dependent agent.
Exempt Persons
Certain entities are exempt from corporate tax, including:
- Government entities and public benefit organisations.
- Extractive businesses (e.g., oil and gas) and non-extractive natural resource companies are subject to emirate-level taxation instead. Note: In February 2025, Sharjah introduced a 20% emirate-level tax on extractive and non-extractive natural resources activities.
- Qualifying investment funds and pension funds.
If you are uncertain about your status, it is advisable to consult a tax advisor.
Corporate Tax Rates and Thresholds in 2026
The UAE’s corporate tax rates remain unchanged in 2026, supporting small businesses while applying progressive rates to higher earners.
- Standard Rates:
- 0% on taxable income up to AED 375,000.
- 9% on taxable income exceeding AED 375,000.
- Domestic Minimum Top-up Tax (DMTT): For multinational enterprises (MNEs) with global consolidated revenues over €750 million, a 15% effective minimum tax applies under OECD Pillar Two rules, effective from January 1, 2025. If the effective tax rate falls below 15%, a top-up tax is imposed.
Example: A company with AED 1 million in taxable income pays 0% on the first AED 375,000 and 9% on the remaining AED 625,000, resulting in AED 56,250 in tax.
Exemptions and Reliefs
Several reliefs are available to support smaller entities and specific sectors:
- Small Business Relief (SBR): Businesses with annual revenue below AED 3 million may elect SBR, which treats them as having no taxable income. This relief is available for tax periods ending on or before December 31, 2026. Businesses must elect SBR on their tax return to benefit.
- Other Reliefs:
- Tax losses can be carried forward indefinitely and offset up to 75% of future taxable income.
- Foreign tax credits are available to avoid double taxation.
- Proposed R&D tax incentive: Expected to take effect for tax periods starting on or after January 1, 2026, offering additional deductions or credits for qualifying research activities.
Free Zone Corporate Tax Regime
Free zones continue to play a key role in the UAE’s business landscape, and the tax regime maintains their appeal:
- Qualifying Free Zone Persons (QFZPs): Eligible entities enjoy 0% tax on “Qualifying Income” (e.g., from qualifying activities like manufacturing, logistics, or trading with non-UAE entities).
- Non-Qualifying Income: Taxed at 9%.
- De Minimis Rule: If non-qualifying income is below 5% of total revenue or AED 5 million (whichever is lower), the entire income may qualify for 0% tax.
To qualify as a QFZP, businesses must maintain sufficient presence in the free zone, including adequate employees and assets. The FTA’s guide on Free Zone Persons outlines the detailed criteria.
Calculating Taxable Income
Taxable income is based on accounting income under IFRS or equivalent standards, adjusted for tax purposes.
- Starting Point: Net profit from financial statements.
- Additions: Non-deductible expenses (e.g., fines, bribes, certain entertainment costs).
- Deductions: Allowable expenses (e.g., interest up to limits, depreciation).
- Exempt Income: Dividends from UAE residents and certain capital gains are exempt.
Refer to the FTA’s guide, “Determination of Taxable Income,” for case studies and adjustment details.
Registration Process
All taxable persons must register with the Federal Tax Authority (FTA) via the EmaraTax portal.
- Timeline: Within 3 months of incorporation or becoming taxable.
- Requirements: Trade license, financial statements, and identification documents.
- Groups: Tax groups (e.g., holding companies and subsidiaries) can register as a single entity if 95% owned.
Failure to register incurs penalties up to AED 20,000.
Filing and Payment Deadlines
- Tax Return Filing: Due within 9 months after the end of the financial year. For a December 31 year-end, file by September 30 of the following year.
- Payment: Tax is due by the filing deadline. Advance payments are voluntary but recommended to avoid late penalties.
- Audits: The FTA conducts risk-based audits. Businesses should retain records for seven years.
New in 2026: The amended Tax Procedures Law introduces tighter deadlines, including reduced response times to FTA queries from 40 to 30 business days.
Penalties for Non-Compliance
Penalties are strict to ensure compliance:
- Late registration: AED 10,000.
- Late filing: AED 500 per month (up to AED 50,000).
- Late payment: 1% per month on unpaid tax.
- Inaccurate returns: Up to 200% of the tax due.
Voluntary disclosures can reduce penalties by up to 75%.
Recent Updates in 2026
As of February 2026, key developments include:
- Advance Pricing Agreements (APAs): The FTA’s guide on APAs, issued December 31, 2025, provides certainty on transfer pricing for multinationals.
- Service Fee Amendments: New APA application fees are effective January 1, 2026.
- Enhanced FTA Powers: Broader audit scopes and stricter timelines under Federal Decree-Law No. 17 of 2025.
- R&D Incentive: Anticipated rollout to boost innovation.
Monitor the FTA website for further announcements and updates.
Conclusion: Navigating UAE Corporate Tax with Confidence
The UAE’s corporate tax system is straightforward, competitive, and supports business growth. By maintaining compliance, businesses can benefit from available exemptions and reliefs. For those establishing or expanding operations in the UAE, professional guidance is highly recommended. Shuraa TAX offers expert support in tax registration, compliance, and optimisation tailored to your needs.
