# What is UAE corporate tax and who has to pay it

> What is UAE corporate tax: the federal tax on business profits at 0% and 9%, who pays it, how it is calculated, and when to file. Read the full guide.

Source: https://einvoicedirect.ae/uae-corporate-tax/what-is-uae-corporate-tax  
Last updated: 2026-06-05  
Publisher: EInvoice Direct (Massive FZCO), UAE e-invoicing software.

## What is UAE corporate tax?

UAE corporate tax is a federal direct tax on the net profit of businesses operating in the United Arab Emirates. It was introduced by Federal Decree-Law 47 of 2022 and applies to financial years starting on or after June 1, 2023. The standard rate is 0% on taxable income up to AED 375,000 and 9% above that threshold.

This guide explains what is UAE corporate tax in practical terms for business owners and finance teams. We cover the legal basis, who has to pay, how taxable income is worked out, and a sample calculation. For the full topic map, see our [UAE corporate tax](https://einvoicedirect.ae/uae-corporate-tax) hub.

## The legal basis: Federal Decree-Law 47 of 2022

The UAE corporate tax regime sits in Federal Decree-Law 47 of 2022 on the Taxation of Corporations and Businesses. It is supported by Cabinet Decisions and Ministerial Decisions that set rules for free zones, small business relief, transfer pricing, and group taxation.

The law gives the Federal Tax Authority (FTA) the power to administer corporate tax. The Ministry of Finance (MoF) sets policy. You can read the law and official guidance on the [UAE Ministry of Finance](https://mof.gov.ae) and [Federal Tax Authority](https://tax.gov.ae) websites.

### When did it start?

Corporate tax applies to financial years that begin on or after June 1, 2023. A business with a calendar year end started its first tax period on January 1, 2024. A business with a June year end started on June 1, 2023.

### Why the UAE introduced corporate tax

The UAE introduced corporate tax to align with global tax standards, including the OECD framework on minimum taxation. It also broadens government revenue beyond oil and indirect taxes such as VAT (value added tax), which has been in force at 5% since January 1, 2018.

## UAE corporate tax explained: who pays it

Corporate tax meaning in the UAE covers a wide range of persons. The law uses the term Taxable Person, which includes companies and certain individuals carrying on a business.

### Resident persons

A Resident Person includes:

- Companies incorporated in the UAE, including mainland and free zone entities.
- Foreign companies effectively managed and controlled in the UAE.
- Natural persons (individuals) carrying on a business in the UAE with annual turnover above AED 1,000,000.

### Non-resident persons

A Non-Resident Person is taxed if they have a Permanent Establishment in the UAE, earn UAE-sourced income, or have a nexus through UAE real estate. A nexus rule means a link to the UAE that is strong enough to trigger tax.

### Exempt persons

Some entities are exempt, either automatically or by application. These include:

- UAE federal and emirate government entities.
- Government-controlled entities listed by Cabinet decision.
- Extractive businesses and non-extractive natural resource businesses, which remain taxed at emirate level.
- Qualifying Public Benefit Entities, pension funds, and investment funds that meet conditions.

## Corporate tax rates and thresholds

The headline rate structure is simple. The detail sits in how taxable income is calculated and how free zones are treated.

| Category | Rate | Notes |
| --- | --- | --- |
| Taxable income up to AED 375,000 | 0% | Applies to all Taxable Persons |
| Taxable income above AED 375,000 | 9% | Standard rate |
| Qualifying Free Zone Person (QFZP) on qualifying income | 0% | Must meet substance and other conditions |
| QFZP on non-qualifying income | 9% | Standard rate applies |
| Large multinationals (EUR 750M+ global revenue) | 15% DMTT | Domestic Minimum Top-up Tax from January 2025 |

For a deeper breakdown of each band and how the free zone rules work, see our [corporate tax rates explained](https://einvoicedirect.ae/uae-corporate-tax/uae-corporate-tax-rates) guide.

### Small business reliefSmall Business Relief lets resident businesses with revenue up to AED 3,000,000 elect to be treated as having no taxable income. It is available through tax periods ending on or before December 31, 2026. Read more in our guide to small business relief. ## How taxable income is calculated Taxable income starts with accounting net profit from financial statements prepared under IFRS (International Financial Reporting Standards) or IFRS for SMEs. The FTA then requires several adjustments.Common adjustments

- Add back non-deductible expenses such as fines, bribes, and 50% of client entertainment.
- Add back interest expense that exceeds the general interest limitation (30% of EBITDA, with a safe harbour of AED 12,000,000).
- Deduct exempt income such as qualifying dividends and capital gains from Participating Interests.
- Apply transfer pricing adjustments for related party transactions at arm's length.
- Carry forward tax losses, up to 75% of taxable income in a later year.

### A worked example

Assume Desert Trading LLC is a mainland UAE company with a calendar year end. Its first tax period is January 1 to December 31, 2024. Its accounting profit before tax is AED 900,000.

- Start with accounting profit: AED 900,000.
- Add back non-deductible client entertainment: AED 20,000.
- Adjusted taxable income: AED 920,000.
- First AED 375,000 taxed at 0%: AED 0.
- Remaining AED 545,000 taxed at 9%: AED 49,050.
- Corporate tax payable: AED 49,050.

The company files its return and pays the tax within 9 months of the year end, so by September 30, 2025.

## Registration, filing, and payment

Every Taxable Person must register with the FTA and obtain a Corporate Tax Registration Number, even if the final tax is zero. This includes free zone companies and qualifying small businesses claiming relief.

### Filing deadline

The corporate tax return is filed within 9 months after the end of the financial year. Tax is paid at the same time. There are no advance payments under the current rules.

### Records

You must keep accounting records and supporting documents for at least 7 years. Transfer pricing documentation rules may apply if related party transactions exceed thresholds set by the Ministry of Finance.

For a walkthrough of the EmaraTax process, see our guide to [corporate tax registration step by step](https://einvoicedirect.ae/uae-corporate-tax/uae-corporate-tax-registration).

## How corporate tax interacts with VAT and e-invoicing

Corporate tax is separate from VAT. VAT is a 5% indirect tax on supplies of goods and services. Corporate tax is a direct tax on profits. A business can be registered for both, and most active companies are.

The UAE is rolling out mandatory e-invoicing under a Peppol 5-corner DCTCE (Decentralized Continuous Transaction Control and Exchange) model in PINT AE format. Phase 1 go-live for businesses with annual revenue of AED 50,000,000 or more is January 1, 2027. SMEs follow on July 1, 2027. Clean invoice data supports accurate corporate tax filings.

For the bigger picture, return to the [UAE corporate tax](https://einvoicedirect.ae/uae-corporate-tax) hub.

## Penalties for non-compliance

Late registration, late filing, and incorrect returns can trigger administrative penalties under the tax procedures law (Federal Decree-Law 28 of 2022 and updates). Penalties for late corporate tax registration have reached AED 10,000 in published FTA decisions. Other fines apply for late filing, late payment, and failure to keep records.

Voluntary disclosure of errors before the FTA finds them usually reduces the penalty. The best practice is accurate bookkeeping every month, not a scramble at year end.

Want pricing for software that handles UAE e-invoicing and supports your corporate tax record keeping? EInvoice Direct includes an accredited service provider (ASP) at no extra charge and connects to Zoho Books, QuickBooks, Xero, Tally, Sage, SAP, Oracle NetSuite, Microsoft Dynamics 365, and Odoo. [Get UAE e-invoicing pricing](https://einvoicedirect.ae/for-businesses#contact) to see how EInvoice Direct works for your business.

## Frequently asked questions

### What is UAE corporate tax in simple terms?

UAE corporate tax is a federal tax on the net profit of businesses. It was introduced by Federal Decree-Law 47 of 2022 and applies to financial years starting on or after June 1, 2023. The rate is 0% on taxable income up to AED 375,000 and 9% above that. Most companies, including free zone entities, must register with the Federal Tax Authority.

### Who has to pay corporate tax in the UAE?

Mainland companies, free zone companies, foreign companies managed in the UAE, and individuals running a business with turnover above AED 1,000,000 must pay UAE corporate tax. Non-residents are taxed if they have a Permanent Establishment in the UAE or earn UAE-sourced income. Government entities and certain qualifying funds are exempt.

### Is free zone income taxed in the UAE?

Free zone companies are still subject to corporate tax, but a Qualifying Free Zone Person can pay 0% on qualifying income if it meets substance, audited financial statements, and qualifying activity tests. Non-qualifying income is taxed at the standard 9%. Each free zone company should review its activities against the Ministerial Decisions that define qualifying income.

### When is the UAE corporate tax return due?

The corporate tax return is filed within 9 months after the end of the financial year. A company with a December 31, 2024 year end must file and pay by September 30, 2025. There are no quarterly advance payments. Late filing and late payment trigger administrative penalties under the tax procedures law.

### What is the corporate tax meaning in the UAE versus VAT?

Corporate tax is a direct tax on business profits at 0% or 9%. VAT is an indirect tax on the supply of goods and services at 5%. A business can be liable for both. VAT is collected from customers and remitted monthly or quarterly. Corporate tax is paid on the net profit reported in annual financial statements.

### Do small businesses pay UAE corporate tax?

Small businesses with revenue up to AED 3,000,000 can elect Small Business Relief, which treats them as having no taxable income for the period. The election is available for tax periods ending on or before December 31, 2026. They must still register with the FTA, file a simplified return, and keep records.

### What happens if I do not register for corporate tax?

Failure to register on time can trigger an administrative penalty of AED 10,000 under FTA decisions. Continued non-compliance can lead to further fines for late filing, late payment, and incorrect returns. Every Taxable Person must register, including free zone companies and small businesses claiming relief, even if the final tax due is zero.


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This content is informational and is not tax, legal, or financial advice.
For UAE e-invoicing pricing, see https://einvoicedirect.ae/for-businesses#contact