UAE corporate tax: what small businesses and free zone firms need to know

The UAE introduced a federal corporate tax for financial years starting on or after 1 June 2023. If you own a company in the UAE, whether on the mainland or in a free zone, it applies to you. That is true even if your profits are small or you expect to pay nothing.

This guide explains who has to register, how the rates work, what free zone companies must do to keep a 0% rate, how Small Business Relief works and which records to keep. It is general information, not tax advice. The rules are detailed, and the Ministry of Finance and the Federal Tax Authority (FTA) update them through new decisions and guidance. Check your own position with a registered tax agent.

Who must register

Registration covers more businesses than many founders expect.

• Every UAE company. This includes free zone companies. It applies even if the company has made no profit, has not started trading yet or expects to pay 0%.
• Some foreign companies. A company set up abroad may need to register if it has a permanent establishment in the UAE, such as a fixed place of business, or certain other links to the country.
• Individuals who run a business. If you trade in your own name, for example as a freelancer or through a sole establishment, you must register once your business turnover in a calendar year goes above AED 1 million. Salary and personal investment income do not count towards that figure.

A small number of organisations, such as government bodies and some public benefit organisations, can be exempt. A normal trading company is not.

Corporate tax registration is separate from VAT registration. If your company is already registered for VAT, you still need to register for corporate tax. Our guide to VAT registration in the UAE covers the VAT side.

The rates: 0% and 9%

For most businesses, corporate tax has two bands:

• 0% on taxable income up to AED 375,000
• 9% on taxable income above AED 375,000

Taxable income is not the same as revenue. It starts from the net profit in your financial statements, which is then adjusted under the tax rules. For example, some costs are only partly deductible, such as client entertainment, and some income, such as certain dividends, is exempt.

A simple example: if your taxable income for the year is AED 500,000, the first AED 375,000 is taxed at 0% and the remaining AED 125,000 at 9%. The tax due is AED 11,250.

Large multinational groups have extra rules, including a minimum top-up tax, which this guide does not cover.

Free zone companies and the 0% rate

Being in a free zone does not, by itself, mean you pay no corporate tax. A free zone company that meets the conditions to be a Qualifying Free Zone Person can pay 0% on its qualifying income. Income that does not qualify is taxed at 9%.

The conditions, in general terms, are:

• Adequate substance. The company's main income-earning activities must take place in the free zone, with enough qualified staff, assets and operating costs for the size of the business.
• Qualifying income. Qualifying income generally comes from transactions with other free zone businesses, and from activities on an official list, such as manufacturing, logistics and certain distribution from designated zones. The current list is set by Ministerial Decision No. 229 of 2025. Income from mainland customers, or from selling to individuals, often does not qualify.
• The de minimis rule. A company can earn a small amount of non-qualifying revenue and keep its status: up to 5% of its total revenue or AED 5 million, whichever is lower. Go over that limit and the company loses its status from the start of that tax period and for the next four. All its taxable income is then taxed at the standard rates.
• Audited financial statements. A Qualifying Free Zone Person must have its financial statements audited every year.
• Transfer pricing. Transactions with related parties, such as companies or people under the same ownership, must be priced as if the parties were independent, with documents to support this.

A free zone company can also choose to be taxed at the standard rates instead. Some do this when they cannot meet the conditions in practice.

Do not choose a free zone only for the 0% rate. Check that your activity and customers will produce qualifying income and that you can meet the substance and audit conditions. Our guide to qualifying income for free zone companies goes through the lists in detail, and our comparison of free zone and mainland companies explains the wider differences.

Small Business Relief

Small Business Relief is designed for businesses with low revenue. A UAE resident business with revenue of AED 3 million or less in a tax period can choose to use it. If you do, you are treated as having no taxable income for that period, so no corporate tax is due.

Points to know:

• Time limit. The relief was due to end with tax periods ending in 2026. Ministerial Decision No. 131 of 2026 extended it to tax periods that end on or before 31 December 2029.
• Revenue test. Your revenue must be AED 3 million or less in the current tax period and in every earlier tax period. Once you go over the limit, you cannot use the relief again.
• You still file. You must register, keep records and file a tax return. You choose the relief in your return, and it is not applied automatically.
• Who cannot use it. Qualifying Free Zone Persons cannot use the relief, and neither can members of multinational groups with consolidated revenue above AED 3.15 billion.
• No splitting. If a business is split into smaller companies to stay under the limit, the FTA can refuse the relief.

Our guide to Small Business Relief covers how to elect it and how to plan for the end of the relief.

Registering, filing and paying

You register on EmaraTax, the FTA's online tax platform, which you sign in to with UAE Pass. Once your application is approved, you receive a corporate tax registration number.

You will usually need:

• your trade licence
• your memorandum and articles of association (MOA and AOA), or other founding documents
• the passport and Emirates ID of each owner with more than 25% of the company, and of the authorised signatory
• proof of the signatory's authority, such as a power of attorney or board resolution
• your company's contact details, address and financial year

A company incorporated on or after 1 March 2024 must apply within three months of its incorporation, under FTA Decision No. 3 of 2024. Late registration carries an administrative penalty of AED 10,000, and late filing or payment attracts penalties too. Our guide to corporate tax deadlines and penalties sets out the timelines.

Your tax period is normally your financial year, which is usually 12 months. You must file your corporate tax return and pay any tax due within nine months of the end of each tax period. For a year ending on 31 December, that means by 30 September of the following year.

Records you need to keep

Good records make filing simpler and help if the FTA asks questions.

• Keep records for at least seven years after the end of the tax period they relate to. This includes invoices, contracts, bank statements, payroll records and your accounts.
• Prepare financial statements using International Financial Reporting Standards (IFRS). A simplified version is available for smaller businesses.
• Arrange an audit if you need one. Audited financial statements are required for Qualifying Free Zone Persons and for businesses with revenue above AED 50 million. Some free zones also ask for audited accounts when you renew your licence. Our guide to bookkeeping and audit requirements explains who needs what.
• Keep transfer pricing records for transactions with related parties, such as loans between you and your company or payments between group companies.

Common mistakes

• Treating a free zone licence as a 0% guarantee. The rate depends on your income and on meeting every condition, every year.
• Not registering a dormant company. A company that has not traded still has to register and file.
• Forgetting to elect Small Business Relief. If you do not choose it in your return, it does not apply.
• Mixing personal and company money. Payments between you and your company, such as loans or a salary you pay yourself, need to be recorded and priced at market value.
• Missing the first deadline. New companies are the most likely to miss the three-month registration window.

Getting advice

Corporate tax depends on your structure, your activity and where your customers are. Before you make decisions based on the rates in this guide, speak to a registered tax agent. A tax agent registered with the FTA can review your position, prepare your returns and deal with the FTA for you.

If you are still setting up, our business setup team can help you choose between mainland and free zone with tax in mind, and can handle corporate tax and VAT registration as part of your setup. To compare locations, start with our overview of Dubai's free zones.

Sources

• UAE Government portal: Corporate tax
• Federal Tax Authority: Corporate Tax registration
• Federal Tax Authority: Small Business Relief
• Ministry of Finance: Small Business Relief extended to 31 December 2029
• Ministry of Finance: Ministerial Decision No. 229 of 2025 on qualifying and excluded activities (PDF)
• Federal Tax Authority: Corporate Tax late registration penalty waiver