UAE Corporate Tax Rate Explained

Introduction

The UAE introduced Corporate Tax effective from 1 June 2023, marking a major shift in the country’s fiscal landscape. For the first time, companies operating in the UAE are required to pay a federal corporate tax on their profits, bringing the country in line with global tax standards and increasing fiscal sustainability.

It will explain in detail the UAE Corporate Tax rates, who they apply to, the conditions that determine your rate, and how Free Zone and multinational companies are treated differently.

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⚖️ Legal Basis

Corporate Tax is governed by:

• Federal Decree-Law No. 47 of 2022 on the Taxation of Corporations and Businesses

• Cabinet Decision No. 55 of 2023 and other implementing decisions

• OECD’s BEPS Pillar Two framework for large multinationals

The Federal Tax Authority (FTA) is the enforcing body.

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🧮 Corporate Tax Rates in the UAE

✅ Standard Corporate Tax Rates

Taxable Income (Per Financial Year) Corporate Tax Rate

Up to AED 375,000 0% (Small business relief threshold)

Above AED 375,000 9%

Multinationals meeting Pillar Two rules 15% (Global minimum tax)

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1. 💼 0% Tax Rate

• Applies to the first AED 375,000 of taxable income.

• Aimed at supporting startups, small businesses, and SMEs.

• Also applies to Qualifying Free Zone Persons (QFZPs) on qualifying income.

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2. 💼 9% Tax Rate

• Applies to taxable income exceeding AED 375,000.

• This is the standard UAE corporate tax rate for most companies.

• Applies to mainland companies, non-qualifying Free Zone entities, and foreign businesses with a Permanent Establishment (PE) in the UAE.

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3. 🌍 15% Tax Rate (Global Minimum Tax)

• Applies to large multinational groups with consolidated global revenues of €750 million or more.

• Aligned with OECD BEPS Pillar Two.

• To be implemented through the Domestic Minimum Top-up Tax mechanism.

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🏢 Free Zone Entities: 0% or 9%?

Free Zones enjoy a special tax treatment under UAE Corporate Tax Law. Entities registered in Free Zones may benefit from a 0% tax rate if they qualify as a Qualifying Free Zone Person (QFZP).

🟢 0% Rate on Qualifying Income

To qualify, the Free Zone company must:

• Earn Qualifying Income (e.g. from other Free Zone entities, or international clients)

• Maintain adequate substance in the UAE

• Prepare and submit audited financial statements

• Not elect to be taxed under the normal regime

🔴 9% Rate on Non-Qualifying Income

Income that doesn't fall under the definition of "Qualifying" will be subject to the standard 9% rate.

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📉 Small Business Relief and the 0% Threshold

Small Business Relief is available to resident businesses with revenues below AED 3 million in a tax period (available until the end of 2026).

Impact:

• Eligible businesses are treated as having no taxable income (even if profit exceeds AED 375,000)

• Effectively taxed at 0%, provided revenue criteria is met

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❗ Important Notes on Tax Rate Calculation

• Taxable income is based on net accounting profit as per IFRS, adjusted for exempt income, disallowed expenses, and other tax-specific rules.

• Exempt income includes qualifying dividends, foreign branch income, and certain capital gains.

• Withholding tax rate on cross-border payments is currently 0% but the mechanism exists under the law.

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📋 Practical Example

Let’s say a UAE mainland company earns AED 800,000 in net profit.

• First AED 375,000 = taxed at 0%

• Remaining AED 425,000 = taxed at 9% → AED 38,250 Corporate Tax payable

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🧠 Why This Matters

Understanding the applicable corporate tax rate ensures:

✅ Correct tax planning and cash flow management

✅ Proper pricing of products and services

✅ Timely return filing and payment

✅ Compliance with FTA audit requirements

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🧾 Let Us Help You

At Sheikh Anwar Accounting and Auditing LLC, we help businesses:

• Register for Corporate Tax and TRN

• Calculate tax liabilities and file returns

• Structure operations to benefit from the 0% rate (QFZP analysis)

• Assess Pillar Two applicability and prepare Transfer Pricing documentation

• Handle FTA audits and compliance reviews

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📞 Need Expert Tax Help? Contact Us Today!

🌐 www.sa-auditors.com

📩 info@sa-auditors.com | 📱 +971-XXX-XXXX

📍 Dubai | Abu Dhabi | Sharjah