UAE Corporate Tax, plainly.

The headline mechanics

UAE Corporate Tax was introduced on 1 June 2023 by Federal Decree-Law No. 47 of 2022. It applies to financial years starting on or after that date. Four numbers explain almost everything:

• 0% on taxable profit up to AED 375,000 (USD 102,000) per entity per year.
• 9% on taxable profit above AED 375,000.
• 0% Qualifying Free Zone Person rate, available to free-zone companies meeting substance, de minimis and audit tests.
• 15% Domestic Minimum Top-up Tax (DMTT), effective from January 2026, for MNE groups with consolidated annual revenue above EUR 750 million.

Who pays

Every UAE entity is in scope: mainland LLCs, free zone companies, branches of foreign companies, partnerships. Even natural persons carrying on a UAE business with annual turnover above AED 1 million are in scope.

Out of scope: government and government-controlled entities, qualifying public benefit entities, certain investment funds, and pure passive personal investment income.

Registration

Registration is mandatory for every UAE entity, regardless of whether tax will ultimately be payable. The deadline depends on the date of incorporation; for companies incorporated after 1 March 2024, registration is due within 3 months of the date of incorporation.

There is no government fee for CT registration itself. The FTA's AED 10,000 late-registration penalty is currently waived for taxpayers who submit their CT registration plus their first CT return within 7 months of their first financial year-end (the FTA's penalty-waiver initiative runs to July 2026).

The Qualifying Free Zone Person (QFZP) regime

This is the regime that allows free-zone companies to retain 0% Corporate Tax on qualifying income. To qualify, the company must meet four conditions:

1. Adequate substance

The company must maintain "adequate" substance in the free zone — staff, premises, expenditure proportionate to the income earned. There is no specific headcount or floor-space test; it is qualitative and assessed by the FTA on a case-by-case basis. A pure mailbox company with no people will fail.

2. Qualifying income

Only "qualifying income" benefits from the 0% rate. Broadly, qualifying income includes:

• Income from transactions with other free-zone persons (where the FZP is the beneficial recipient).
• Income from "qualifying activities" listed by Cabinet Decision — currently includes manufacturing, distribution from a designated zone, holding shares, fund management, headquarter services, and others.
• Income from non-free-zone persons where the activity is qualifying.

Income from UAE mainland sales is generally not qualifying. This is the trap that catches free-zone companies whose customer base drifts mainland.

3. The de minimis rule

Non-qualifying revenue must remain below the lower of 5% of total revenue or AED 5 million. Exceed either threshold, and the entire taxable profit falls under the 9% rate for that financial year — not just the non-qualifying portion. This is the harshest provision in the regime.

4. Audited financial statements

The QFZP must prepare and maintain audited financial statements under IFRS. This is what catches free zone companies in IFZA, Meydan and JAFZA which do not otherwise require audit at the regulator level — they need audit for QFZP.

Small Business Relief

A useful relief for early-stage operating businesses: if your total revenue for the tax period (and the previous tax period) does not exceed AED 3 million (USD 818,000), you can elect for Small Business Relief, which deems your taxable income to be zero. Available for tax periods ending on or before 31 December 2026.

This is particularly valuable for mainland companies that cannot access the QFZP regime, but whose revenue stays below the AED 3m threshold while they grow.

The new 15% Domestic Minimum Top-up Tax

From financial years beginning on or after 1 January 2025 (Cabinet Decision 142 of 2024), the UAE has implemented the OECD's Pillar Two framework via a Domestic Minimum Top-up Tax (DMTT). This applies to UAE entities that are part of a Multinational Enterprise (MNE) group with consolidated annual revenue above EUR 750 million in at least two of the four preceding financial years.

The DMTT increases the effective UAE tax rate on in-scope entities to 15%. For most readers of this guide, the DMTT will not apply — but if your company is part of a global group above the threshold, it materially changes the structuring calculus.

Filing

The Corporate Tax return is filed annually, within 9 months of the financial year-end. So a company with a 31 December year-end files by 30 September of the following year. No advance tax payments; the return is the payment trigger.

Common planning points

• Choose your free zone with the de minimis rule in mind. A single UAE mainland contract can push you over the 5% threshold and lose your 0% rate. Plan revenue mix from day one.
• Build audit into your operations. If you plan to claim QFZP, you need audited financials regardless of which free zone — budget for the audit fee from year one.
• Consider Small Business Relief for the early years of a mainland LLC, when revenue is still building.
• Plan group structure with care. Multi-entity UAE groups can elect for tax-group treatment under certain conditions, allowing intra-group losses to be set off.
• Track related-party transactions. The UAE Corporate Tax regime imports OECD transfer-pricing rules. Material transactions with related parties require benchmarking and documentation.

How we help

Our Tax & Compliance practice handles Corporate Tax registration (USD 550), QFZP assessment as part of structuring (free as part of any incorporation engagement), and the annual Corporate Tax return (from USD 3,500). For complex groups we provide tax structuring memoranda; for in-scope MNE groups we coordinate on Pillar Two implementation.

This guide is for general information and does not constitute legal or tax advice. UAE Corporate Tax law and FTA guidance evolves; always seek professional advice on your specific situation. Updated 16 May 2026 by the ArxSetup tax practice. UAE Corporate Tax registration, returns and FTA correspondence are delivered through our affiliated FTA-registered tax-agent partners.