UAE Corporate Tax 2026: Complete Guide for Businesses

Overview of UAE Corporate Tax

The United Arab Emirates introduced a federal corporate tax (CT) regime effective for financial years starting on or after 1 June 2023, under Federal Decree-Law No. 47 of 2022. This landmark legislation ended the UAE's long-standing reputation as a zero-tax jurisdiction for businesses and brought the country into closer alignment with global tax standards advocated by the OECD.

Corporate tax applies to the net profits of businesses and companies operating in the UAE. It is administered by the Federal Tax Authority (FTA), the same body overseeing VAT and excise tax. The introduction of corporate tax is part of the UAE's broader strategy to diversify revenue sources, meet international commitments including the OECD's BEPS (Base Erosion and Profit Shifting) framework, and maintain the country's attractiveness as a global business hub.

For most businesses, particularly Small and Medium Enterprises (SMEs), the regime is designed to be simple and low-burden. The headline rate of 9% is among the lowest corporate tax rates in the world, and the AED 375,000 small business threshold ensures startups and micro-businesses are protected from tax in their early growth phases.

Who Must Pay Corporate Tax?

UAE corporate tax applies to a broad range of business entities and individuals carrying on a business in the UAE. Understanding exactly who is a "taxable person" is the starting point for compliance.

UAE Resident Persons

The following are considered UAE resident persons subject to corporate tax on their worldwide income:

• UAE-incorporated companies — all legal entities registered under UAE law, including LLCs, PSCs, and public joint-stock companies
• Foreign companies effectively managed from the UAE — a foreign company whose place of effective management and control is the UAE
• Individuals conducting business in the UAE — natural persons who earn business income in the UAE exceeding AED 1 million per calendar year

Non-Resident Persons

Non-residents are subject to UAE corporate tax on income attributable to a Permanent Establishment (PE) in the UAE, or income sourced from the UAE. A PE generally arises when a foreign company has a fixed place of business in the UAE through which it conducts its operations.

Who Is Exempt?

Several categories are wholly exempt from corporate tax, including UAE government entities, government-controlled entities, qualifying public benefit organizations, qualifying investment funds, and regulated pension funds. Extractive businesses (oil, gas, and natural resources) continue to be subject to their existing emirate-level fiscal arrangements and are not subject to federal corporate tax.

Tax Rates & Thresholds

The 0% rate on taxable income up to AED 375,000 is designed to support SMEs and startups. A business with taxable income of AED 500,000, for example, would pay 0% on the first AED 375,000 and 9% on the remaining AED 125,000 — an effective tax rate of just 2.25% on total income.

For large multinational enterprise groups with consolidated global revenues exceeding AED 3.15 billion (€750 million), the UAE has committed to implementing the OECD Pillar Two global minimum tax of 15%, ensuring these entities pay at least the global minimum rate.

Exemptions & Zero-Rate Categories

The UAE corporate tax regime contains several important exemptions that can significantly reduce or eliminate the tax burden for qualifying entities:

Small Business Relief

Businesses with annual revenue not exceeding AED 3 million can elect for Small Business Relief, treating their taxable income as zero. This relief is available for tax periods ending on or before 31 December 2026 and is designed specifically to ease the transition for micro-businesses and startups.

Qualifying Free Zone Persons

Businesses in UAE free zones that meet the "Qualifying Free Zone Person" (QFZP) criteria can continue to benefit from a 0% corporate tax rate on their Qualifying Income. However, non-qualifying income — such as income from transactions with UAE mainland businesses — is taxed at 9%. See our detailed article on Dubai Free Zone Tax Benefits for full criteria.

Exempt Income

Certain types of income are exempt from corporate tax regardless of the entity's status:

• Dividends received from UAE-resident companies
• Capital gains from the disposal of qualifying shareholdings (participation exemption)
• Income of a foreign permanent establishment of a UAE resident company (where the foreign tax exemption applies)
• Income earned by a non-resident from operating aircraft or ships in international transportation

Free Zone Businesses

The UAE's free zones have long been a cornerstone of the country's economic model, offering 100% foreign ownership, full profit repatriation, and historically zero taxation. Under the corporate tax regime, free zone companies can continue to benefit from a 0% rate on qualifying income — but this requires careful compliance with newly defined rules.

A Qualifying Free Zone Person (QFZP) must:

• Maintain adequate substance in the free zone
• Derive qualifying income from qualifying activities
• Not have elected to be subject to standard corporate tax
• Comply with transfer pricing rules
• Prepare audited financial statements

Qualifying activities include manufacturing, fund management, headquarters services, logistics, and financial services. De minimis thresholds allow a QFZP to have limited non-qualifying income without losing its QFZP status — generally, non-qualifying income should not exceed 5% of total revenue or AED 5 million, whichever is lower.

For a detailed breakdown, read our guide on Dubai Free Zone Tax Benefits in 2026.

Calculating Taxable Income

Taxable income is generally derived from the accounting net profit as shown in the business's financial statements, subject to adjustments. Key adjustments include:

Deductible Expenses

Business expenses are generally deductible if incurred wholly and exclusively for business purposes. Specific rules apply to:

• Interest deductions: Limited to 30% of EBITDA for net interest expenditure exceeding AED 12 million (General Interest Deduction Limitation Rule)
• Entertainment expenses: 50% deductible
• Pension contributions: Fully deductible if compliant with UAE law
• Charitable donations: Deductible only if made to approved public benefit entities

Non-Deductible Items

The following are not deductible for corporate tax purposes:

• Distributions to owners or partners
• Personal expenses of owners or directors
• Fines and penalties
• Bribes and illicit payments
• Expenses incurred to earn exempt income

Tax Losses

Tax losses can be carried forward indefinitely (from tax periods beginning on or after 1 June 2023) and offset against up to 75% of taxable income in future periods. This provides important relief for businesses that experience losses in their early years or during economic downturns.

Filing Deadlines & Registration

Registration

All taxable persons must register for corporate tax with the FTA and obtain a Tax Registration Number (TRN). Registration is done through the EmaraTax portal. Failure to register by the specified deadline results in administrative penalties.

Most businesses were required to register by the end of 2023 or 2024 depending on their financial year-end. Businesses established after the law's effective date have 3 months from their date of incorporation to register.

Tax Return Filing

Corporate tax returns must be filed and tax payments made within 9 months of the end of the relevant tax period. For a business with a financial year ending 31 December 2025, the filing deadline is 30 September 2026.

Transfer Pricing Rules

The UAE corporate tax law includes robust transfer pricing provisions aligned with OECD guidelines. Transactions between related parties must be conducted on arm's length terms — meaning the pricing should be the same as it would be between unrelated parties in comparable circumstances.

Businesses with related party transactions must maintain transfer pricing documentation, including a Master File and Local File, if they exceed certain thresholds. Country-by-Country Reporting (CbCR) requirements apply to UAE-headquartered multinational groups with consolidated revenues of AED 3.15 billion or more.

Penalties for Non-Compliance

How to Prepare Your Business

With corporate tax now firmly in place, businesses that have not already done so must take immediate steps to ensure compliance. Here is our recommended action plan:

1. Register for corporate tax via EmaraTax if not already done — penalties apply for late registration
2. Assess your taxable person status — determine whether you are a resident or non-resident person and whether any exemptions apply
3. Review your corporate structure — especially relevant for free zone companies and multinational groups
4. Update your accounting systems to capture tax adjustments and produce IFRS/GAAP-compliant financial statements
5. Implement transfer pricing policies if you transact with related parties
6. Assess applicability of Small Business Relief or other reliefs
7. Engage a qualified tax advisor to review your position and handle compliance obligations

The UAE corporate tax regime, while new, is designed with a business-friendly approach. With the right planning and professional guidance, most businesses can manage their obligations efficiently and minimise their effective tax rate.

For businesses in UAE free zones, also read our dedicated guide on Free Zone Tax Benefits. For understanding your wider tax obligations, explore our article on VAT Registration in the UAE.