Corporate tax for trading companies in the UAE explained

What is corporate tax for trading companies in the UAE?

Corporate tax for trading companies UAE refers to the 9% federal tax on business profits above AED 375,000, introduced by Federal Decree-Law 47 of 2022. It applies to mainland and free zone trading businesses that buy and sell goods, including wholesalers, distributors, importers, and re-exporters. Profits up to AED 375,000 are taxed at 0%.

Trading is the backbone of the UAE economy, from Deira spice merchants to Jebel Ali re-export hubs. If your company sources goods and resells them, you need to understand how the corporate tax rules apply to your margins, your free zone licence, and your filing calendar. This guide explains the rates, the deductions, and the deadlines in plain language. For the wider framework, see our UAE Corporate Tax hub.

Who counts as a trading company under UAE corporate tax?

The Federal Tax Authority (FTA) does not use the word "trading" as a legal category. Instead, it looks at your licensed activity and your actual business model. A trading company is generally any taxable person that earns income from buying and selling goods, whether locally, through imports, or through re-exports.

Common trading activities covered

• General trading (multiple unrelated goods under one licence)
• Wholesale distribution of consumer goods, electronics, or building materials
• Import and re-export through free zones such as JAFZA, DAFZA, or RAKEZ
• Foodstuff and FMCG (fast moving consumer goods) trading
• Auto parts, machinery, and industrial equipment trading
• Online retail and e-commerce stores selling physical products

What about service add-ons?

Many traders also offer installation, warranty, or logistics services. These are taxed under the same 9% rate, but you should keep clear records of goods revenue versus service revenue. This separation matters for VAT (Value Added Tax) reporting and for any free zone qualifying income test.

How much corporate tax does a UAE trading company pay?

The standard rates apply to trading businesses the same way they apply to other sectors. The first AED 375,000 of taxable profit is taxed at 0%. Profit above that is taxed at 9%. Very large multinational groups with global revenue above EUR 750 million pay a 15% Domestic Minimum Top-up Tax (DMTT) from January 2025 onward.

Small Business Relief for small traders

If your trading company has annual revenue of AED 3 million or less, you can elect Small Business Relief. This treats you as having no taxable income for the period, so you pay no corporate tax. The relief is available for tax periods ending on or before 31 December 2026. You still have to register and file a return.

Free zone trading companies: the qualifying free zone person rules

Free zones host a large share of UAE trade. A Qualifying Free Zone Person (QFZP) can pay 0% on its Qualifying Income and 9% only on non-qualifying income. The 0% benefit is not automatic. You must meet several conditions every year.

QFZP conditions for traders

• Maintain adequate substance in the free zone (staff, premises, expenses)
• Earn Qualifying Income as defined by Ministerial Decisions 265 of 2023 and updates
• Not elect to be taxed at the standard rates
• Comply with transfer pricing rules and documentation
• Keep audited financial statements
• Stay within the de minimis limit for non-qualifying revenue (the lower of 5% of total revenue or AED 5 million)

What counts as Qualifying Income for traders?

For a trading company, the most relevant categories are income from transactions with other free zone persons, and income from the distribution of goods from a Designated Zone to a customer that resells or processes them. Selling directly to a mainland end customer is usually non-qualifying income. If you trade physical goods, check whether your free zone is a Designated Zone for VAT and corporate tax purposes.

What can a trading company deduct?

Corporate tax is charged on accounting profit adjusted for tax rules. Most ordinary business costs that a trader incurs are deductible if they are wholly and exclusively for the business and properly documented.

Common deductible costs

• Cost of goods sold, including landed cost, freight, and customs duty
• Warehouse rent, utilities, and security
• Staff salaries, end of service benefits, and visa costs
• Marketing, sales commissions, and trade show expenses
• Depreciation on vehicles, racking, forklifts, and IT equipment
• Bank charges, trade finance fees, and currency hedging costs
• Professional fees for audit, tax, and legal advice

Costs that are restricted or not deductible

• Fines and penalties imposed by any government authority
• 50% of client entertainment expenses
• Donations to bodies not on the FTA approved list
• Interest above the general interest deduction limit (30% of EBITDA, with exceptions)
• Withdrawals by owners or dividends paid to shareholders

Worked example: a Dubai general trading LLC

Imagine Gulf Lines Trading LLC, a mainland general trading company in Dubai. In its first full tax year it reports:

• Revenue: AED 8,000,000
• Cost of goods sold: AED 5,600,000
• Operating expenses: AED 1,500,000
• Accounting profit: AED 900,000

Assuming all expenses are deductible and no adjustments apply, taxable profit is AED 900,000. The first AED 375,000 is taxed at 0%. The remaining AED 525,000 is taxed at 9%, giving corporate tax of AED 47,250. Net profit after tax is AED 852,750.

Same example, but as a free zone QFZP

If the same business operated from a Designated Zone, sold only to other free zone traders, and met every QFZP condition, the AED 900,000 could be Qualifying Income taxed at 0%. If 10% of revenue came from mainland end customers, it would breach the de minimis limit and the entire profit would be taxed at 9%.

Registration, filing, and record keeping

Every trading company in scope must register for corporate tax with the FTA and obtain a Tax Registration Number (TRN). Registration is required even for companies claiming Small Business Relief or 0% QFZP status.

Filing calendar

Records you must keep

• Sales invoices and credit notes
• Purchase invoices, import declarations, and bills of lading
• Inventory records and stock counts
• Bank statements and payment evidence
• Transfer pricing documentation for related party transactions
• Audited financial statements where required

E-invoicing and corporate tax: why they connect

The UAE is rolling out mandatory e-invoicing using the Peppol 5-corner DCTCE (Decentralized Continuous Transaction Control and Exchange) model with the PINT AE (Peppol International Invoice for the UAE) format. Phase 1 go-live is 1 January 2027 for businesses with revenue of AED 50 million or more. SMEs follow on 1 July 2027. Trading companies typically issue high volumes of invoices, so the transition is significant.

Clean e-invoice data also feeds your corporate tax return. Every B2B (business to business) sale and purchase will be reported in a structured format, making it easier for the FTA to cross-check VAT and corporate tax filings. The MoF (Ministry of Finance) has published deadlines and the accredited service provider list on its e-invoicing portal. You should appoint an ASP (Accredited Service Provider) by 30 October 2026 if your revenue is above AED 50 million.

Common mistakes traders make

Mixing personal and business expenses

Owners often pay personal costs from the company account. These are not deductible and may also trigger transfer pricing issues. Open a separate owner drawings account and document any related party transactions.

Ignoring transfer pricing on group purchases

Many UAE traders buy from a sister company abroad. The purchase price must reflect arm's length terms. Keep benchmarking notes, contracts, and a master file if your group is large enough.

Assuming the free zone licence means 0% tax

A free zone licence alone does not give you 0%. You must qualify as a QFZP every single year. One bad year of non-qualifying income can push your whole profit into the 9% band.

Late VAT registration

Mandatory VAT registration applies once taxable supplies exceed AED 375,000 in 12 months. Many traders breach this early and only notice at audit. Voluntary registration is available from AED 187,500.

How trading compares to other UAE sectors

Different industries have different tax pressure points. Margins, inventory rules, and licensing all shift the picture. If you operate in more than one sector or want a comparison, our other guides cover the specifics: Corporate Tax for Real Estate UAE, Corporate Tax for Construction UAE, Corporate Tax for Restaurants UAE, and Corporate Tax for Consultants UAE. Sole owners and small traders may also find Corporate Tax for Freelancers UAE useful.

Practical checklist for trading companies

1. Register for corporate tax and get your TRN.
2. Decide if you will claim Small Business Relief, QFZP status, or pay standard rates.
3. Align your accounting year with a calendar that suits cash flow.
4. Move bookkeeping onto cloud software that supports UAE tax codes.
5. Document all related party transactions with contracts and pricing notes.
6. Get audited financial statements if you exceed the audit threshold or need QFZP status.
7. Plan your e-invoicing rollout well before your Phase 1 or Phase 2 deadline.
8. Review deductions and depreciation policies with a qualified tax advisor.

Where to read the official sources

The primary law is Federal Decree-Law 47 of 2022, supported by Cabinet and Ministerial Decisions. The Federal Tax Authority publishes guides, public clarifications, and the registration portal. The Ministry of Finance publishes legislation and policy decisions. For the full corporate tax framework and links to every official text, see the UAE Corporate Tax hub.

If you want help getting ready for both corporate tax filings and the 2027 e-invoicing mandate, get UAE e-invoicing pricing from EInvoice Direct. Our software for UAE trading companies includes an accredited service provider at no extra charge, so your invoices, tax codes, and audit trail stay aligned with FTA expectations.