Who pays corporate tax in the UAE and who is exempt

What is who pays corporate tax in the UAE?

Who pays corporate tax in the UAE refers to the set of persons inside the scope of Federal Decree-Law 47 of 2022. The law applies to juridical persons such as LLCs and PSCs, qualifying foreign companies, and natural persons running a business with annual turnover above AED 1,000,000. Some entities are exempt by law or by application.

This guide explains the categories of taxpayers, the income thresholds, free zone treatment, and filing duties. For the wider context, see our UAE Corporate Tax hub and our explainer on What Is UAE Corporate Tax. Rates and bands are covered in our guide to UAE Corporate Tax Rates.

Who is in scope of UAE corporate tax

The UAE Federal Tax Authority (FTA) calls taxpayers "taxable persons". A taxable person is either a resident or a non-resident with UAE-sourced income or a permanent establishment in the country. The law splits taxable persons into two groups: juridical persons and natural persons.

Resident juridical persons

A juridical person is a company or other legal entity with separate legal personality. The following are resident taxable persons:

• UAE mainland companies, including LLCs, PJSCs, and PSCs.
• Free zone companies, including those that qualify for the 0% rate.
• Foreign companies that are effectively managed and controlled from the UAE.
• Branches of foreign companies registered in the UAE.
• Partnerships that are treated as juridical persons under the law.

Resident juridical persons pay corporate tax on their worldwide income, subject to relief for foreign tax paid.

Non-resident persons

A non-resident is taxed only on income connected to the UAE. This covers two situations:

• The non-resident has a permanent establishment (PE) in the UAE, such as a fixed place of business or a dependent agent.
• The non-resident earns UAE-sourced income, for example from immovable property in the country.

Natural persons running a business

Natural persons, meaning individuals, are inside the scope only when they run a business or a business activity in the UAE. Cabinet Decision 49 of 2023 sets the trigger at total turnover above AED 1,000,000 in a calendar year. Salaries, personal investment income, and personal real estate income are outside the scope.

For a deeper look at thresholds and bands, read our guide on the UAE Corporate Tax 9 Percent Threshold.

Who is exempt from UAE corporate tax

Federal Decree-Law 47 of 2022 lists exempt persons. Some are exempt automatically. Others must apply to the FTA. The table below sets out the main categories.

An exempt person still has duties. Most must register with the FTA, keep records, and file information when asked.

Free zone companies: who really pays

Free zone companies are inside the corporate tax system. They do not get a blanket exemption. A free zone entity that meets the conditions to be a Qualifying Free Zone Person (QFZP) pays 0% on qualifying income and 9% on non-qualifying income above AED 375,000.

Conditions to be a QFZP

• Maintain adequate substance in the UAE.
• Derive qualifying income as defined by Ministerial Decision 265 of 2023.
• Not elect to be subject to the standard regime.
• Meet the de minimis rule for non-qualifying revenue.
• Prepare audited financial statements.
• Follow transfer pricing rules.

A free zone company that fails any condition loses QFZP status and pays the standard 9% rate on taxable income above the threshold. The legal framework for all of this sits in the UAE Corporate Tax Law.

Natural persons: when individuals pay

Most individuals in the UAE do not pay corporate tax. The law carves out three types of income that stay outside the regime, regardless of amount:

• Employment income, including salary, bonus, and end of service benefits.
• Personal investment income, such as dividends and bank interest not connected to a business.
• Real estate investment income from personal property holdings.

The AED 1,000,000 turnover test

If you run a business as a sole proprietor, a freelancer with a licence, or a partner in an unincorporated partnership, look at your gross turnover from business activities in the calendar year. If total turnover is more than AED 1,000,000, you are a taxable person. You must register, file a return, and pay 9% on taxable income above AED 375,000.

Worked example

Aisha runs a marketing consultancy in Dubai under a freelance permit. In 2024 she invoices AED 1,200,000. Her expenses are AED 300,000.

• Turnover: AED 1,200,000, which is above the AED 1,000,000 test, so she is in scope.
• Taxable income: AED 900,000.
• Tax due: 9% of (AED 900,000 minus AED 375,000) equals AED 47,250.

She may instead claim Small Business Relief if her revenue is up to AED 3,000,000 in any period through 2026, which treats her taxable income as nil for that period.

Large multinationals: the 15% Pillar Two rate

From January 2025, the UAE applies a Domestic Minimum Top-up Tax (DMTT) of 15% to large multinational enterprise groups with consolidated global revenue of EUR 750,000,000 or more in at least two of the last four years. This aligns with the OECD Pillar Two rules. Smaller groups continue to pay the standard 9% rate. Our guide on UAE Corporate Tax 15 Percent Pillar 2 explains the calculation.

When did each group start paying

The regime applies to financial years starting on or after June 1, 2023. The exact first year depends on the entity's own financial year. See our page on the UAE Corporate Tax Effective Date for examples. The table below summarises the main groups.

Registration and filing duties

Every taxable person must register with the FTA and obtain a Corporate Tax Registration Number, even if the final tax is zero. Exempt persons that are not automatically exempt must also register. Filing rules apply across the board.

Key duties

• Register with the FTA through the EmaraTax portal.
• Keep records for at least seven years.
• File a corporate tax return within 9 months of the end of the financial year.
• Pay any tax due by the same 9 month deadline.
• Apply transfer pricing rules for related party transactions.

Penalties for late registration, late filing, or incorrect returns are set by Cabinet Decisions and can be significant. Check the UAE Federal Tax Authority and the UAE Ministry of Finance sites for the latest guidance.

Quick checklist: are you a UAE corporate taxpayer

1. Are you a UAE incorporated company, including a free zone entity? If yes, you are in scope.
2. Are you a foreign company managed from the UAE, or with a PE here? If yes, you are in scope.
3. Are you an individual running a business with turnover above AED 1,000,000 in the calendar year? If yes, you are in scope.
4. Is your only income salary, personal dividends, interest, or personal real estate? If yes, you are out of scope.
5. Are you a government entity, a regulated pension fund, or an approved charity? You may be exempt, but check registration duties.

For more on rate bands and reliefs, see our pages on UAE Corporate Tax Rates and the UAE Corporate Tax hub.

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