Understanding UAE Corporate Tax for Small Businesses
In 2023, the UAE introduced a federal Corporate Tax for the first time — a major shift for a country long known for its tax-free environment. If you run a free zone or mainland company, here’s what the new rules actually mean for you and how to stay compliant without overpaying.
The Headline Rate
The UAE now applies a 9% corporate tax on taxable income above AED 375,000. Income below that threshold is taxed at 0% — meaning most small businesses and startups pay nothing in their early years.
Applies to taxable income above AED 375,000 annually — still one of the most competitive corporate tax rates globally.
Businesses with annual revenue below AED 3 million can elect for Small Business Relief, effectively paying 0% tax for qualifying tax periods.
Corporate Tax was introduced under Federal Decree-Law No. 47 of 2022 and applies to financial years starting on or after 1 June 2023. Small Business Relief is a time-limited concession — it currently applies to tax periods ending on or before 31 December 2026, so businesses should plan ahead for when it phases out.
Do Free Zone Companies Pay Tax?
A Free Zone entity that meets the conditions to be a Qualifying Free Zone Person (QFZP) can continue to benefit from a 0% tax rate on “qualifying income” — generally income earned from transactions with other free zone entities, from outside the UAE, or from specific qualifying activities. Income earned from most mainland UAE sources, or income that falls outside the qualifying activities list, may be taxed at the standard 9% rate. Getting this classification right — and maintaining it — is one of the most common areas businesses need guidance on.
What You Need to Do
- Register for Corporate Tax with the Federal Tax Authority (FTA), even if you expect to owe 0%
- Maintain proper accounting records — audited financial statements are required for many Free Zone entities to keep the 0% Qualifying Free Zone Person benefit
- File your Corporate Tax return annually, within 9 months of your financial year-end
- Review your qualifying income classification each year if you operate in a free zone, to confirm you still meet the conditions for the 0% rate
Quick Tip
Corporate tax registration is mandatory even for businesses that owe nothing and the FTA has issued administrative penalties for late registration. Register early, even before your first taxable year closes.
How DEAZ Can Help
Corporate tax compliance is now a permanent part of doing business in the UAE. Our team helps clients register correctly, structure their free zone income to preserve Qualifying Free Zone Person status where possible and stay ahead of filing deadlines — so tax season never becomes a surprise.
A Note on This Article
Tax rules and thresholds can change. This article reflects our understanding of UAE Corporate Tax law at the time of writing and is provided for general information only — it is not tax advice. Please verify current rates and deadlines with the Federal Tax Authority (tax.gov.ae) or speak with a qualified tax advisor before making decisions.
Need Help With Corporate Tax Registration?
Talk to our team about registering correctly and protecting your qualifying free zone income.
Book Free Consultation