The UAE introduced federal corporate tax in 2023 under Federal Decree-Law No. 47 of 2022, effective for financial years starting on or after 1 June 2023. The headline rate is 9% of taxable profit above an AED 375,000 annual threshold; the freezone “0% corporate tax” carve-out survived but with conditions that change the calculation. This guide is the reader’s-map view, not a tax-advisor substitute.
The headline numbers
| Taxable income | Rate |
|---|---|
| Up to AED 375,000 | 0% |
| Above AED 375,000 | 9% (on the portion above the threshold) |
| Qualifying multinational enterprises (Pillar Two) | 15% top-up under the OECD framework |
The AED 375,000 floor is structured to keep the small-business and freelance population out of the net. A sole proprietor on a freelance permit earning AED 350,000 in taxable profit owes nothing. The same proprietor at AED 500,000 owes 9% of AED 125,000, which is AED 11,250.
Who is in scope
Corporate tax applies to:
- UAE-incorporated companies — LLCs, freezone entities, branch offices of foreign companies.
- Natural persons conducting a business or business activity in the UAE, where the annual turnover from that activity exceeds AED 1,000,000 (per Cabinet Decision No. 49 of 2023). A freelance permit holder under this threshold is out of scope; over it, they file.
- Foreign companies with a permanent establishment in the UAE.
Employment income is not taxable at the individual level — there is no personal income tax in the UAE. The corporate tax regime targets business activity, not salaries.
What counts as taxable income
Taxable income is accounting profit per IFRS, adjusted for specific items the Federal Tax Authority (FTA) lists in the implementing regulations. The notable adjustments:
- Dividends and capital gains from qualifying participations are exempt (the participation exemption).
- Interest deductions: net interest expense up to AED 12 million a year is fully deductible; above that, you deduct the higher of AED 12 million or 30% of EBITDA (Ministerial Decision No. 126 of 2023, Article 8).
- Related-party transactions must be at arm’s length and documented; transfer-pricing rules apply.
- Free zone qualifying income is taxed at 0% if the entity meets the qualifying-freezone-person tests (see below).
The freezone carve-out — what “0% corporate tax” actually means
The freezone exemption survived the 2023 reform but with conditions that are easy to miss in marketing copy. A Qualifying Freezone Person (QFP) pays 0% on qualifying income and 9% on non-qualifying income. The core tests, per FTA guidance:
- Maintain adequate substance in the UAE (real office, real staff in the freezone).
- Derive qualifying income — broadly, transactions with other freezone entities, qualifying activities (e.g. fund management, holding shares, headquarters services), or exports outside the UAE.
- Comply with arm’s-length transfer-pricing.
- Not elect to be subject to standard corporate tax.
- Keep non-qualifying revenue within the de minimis limit: no more than 5% of total revenue or AED 5 million in the tax period, whichever is lower (Ministerial Decision No. 229 of 2025, Article 3), and prepare audited financial statements. Under Article 18(2) of the Decree-Law, failing any QFZP condition at any point in a tax period ends QFZP status from the start of that period, not just for the mainland slice.
The carve-out a freelance consultant should care about: selling services to a UAE mainland customer is non-qualifying income, and is taxed at 9% over the threshold even if the entity is in a freezone. The “set up in DMCC and pay zero” pitch is true only if your customers are outside the UAE or in other freezones.
If a meaningful share of your customers is on the UAE mainland, the QFP route is likely worse than registering on the mainland — you carry the freezone fixed cost and risk failing the de minimis test, which can take the 0% rate away from all your income. Run the calculation against your actual customer book, with an adviser, before signing the freezone licence.
Small Business Relief
A resident business with small revenue can elect out of the calculation altogether. Per the FTA’s Small Business Relief page, a resident person — natural or juridical — whose revenue is AED 3,000,000 or less in the current tax period and in every previous one can elect, period by period, to be treated as having no taxable income. The trade-off: no other exemptions, reliefs or deductions in that period, and the arm’s-length principle still applies even though transfer-pricing documentation is not required. A Qualifying Free Zone Person cannot elect, nor can a member of a multinational group with consolidated revenue above AED 3.15 billion. One year over AED 3m ends eligibility for good: the FTA’s own example is a business on AED 1.9m this year that is out because it took AED 4.3m the year before.
Ministerial Decision No. 131 of 2026 (29 July 2026) amends the relief’s time limit: the AED 3m threshold now applies to tax periods starting on or after 1 June 2023 and ending on or before 31 December 2029.
Registration and filing
Every taxable person must:
- Register with the FTA for corporate tax and receive a Tax Registration Number (TRN). The deadline is staged by licence issuance month; new licences register on incorporation.
- File one return per tax period within nine months of the period end. A 1 June – 31 May tax year files by the following 28 February.
- Pay the tax with the return — there are no advance instalments at present.
Penalties for late registration or late filing are set in the FTA penalty schedule and start at AED 10,000 for late registration. The amounts climb with continued non-compliance.
VAT — the other tax most readers ask about
UAE Value Added Tax has run at 5% since 2018. The registration threshold is AED 375,000 in annual taxable supplies (mandatory) or AED 187,500 (voluntary). A freelance consultant invoicing AED 400,000 a year is required to register for VAT, charge 5% on their UAE invoices, and file quarterly. VAT is separate from corporate tax — being below the corporate-tax AED 1m turnover threshold does not exempt you from VAT.
What an expat resident should do this week
- If you hold a sole-proprietor freelance permit, check whether your trailing twelve-month turnover crosses the AED 1m corporate tax threshold or the AED 375k VAT threshold. Either crossing triggers a registration obligation.
- If you operate through a freezone entity, run the qualifying- income and de minimis tests on your actual revenue mix. Even a modest share of UAE-mainland revenue can put the QFP position at risk — engage a tax advisor.
- Diarise the FTA filing deadline for your tax period end. Nine months sounds generous; in practice the return needs IFRS-grade accounts, transfer-pricing documentation if relevant, and time to engage an auditor.
Related
- UAE banking basics: salary transfer and accounts
- Choosing your first UAE bank
- Golden Visa and premium UAE credit cards
Sources
- Federal Tax Authority — Corporate tax overview: https://tax.gov.ae/en/taxes/corporate.tax.aspx
- Federal Decree-Law No. 47 of 2022 — Taxation of Corporations and Businesses: https://mof.gov.ae/corporate-tax/
- Cabinet Decision No. 49 of 2023 — Natural persons subject to corporate tax: https://mof.gov.ae/tax-legislation/
- Federal Decree-Law No. 47 of 2022 and its amendments (consolidated, MoF): https://mof.gov.ae/wp-content/uploads/2026/01/Federal-Decree-Law-No.-47-of-2022-and-its-amendments-en-v13.1.26.pdf
- FTA — Small Business Relief: https://tax.gov.ae/en/taxes/corporate.tax/corporate.tax.topics/small.business.relief.23.aspx
- Ministerial Decision No. 131 of 2026 — Small Business Relief extended to 2029: https://mof.gov.ae/wp-content/uploads/2026/08/Ministerial-Decision-No.-131-of-2026-Amending-Certain-Provisions-of-Ministerial-Decision-No.-73-of-2023-on-Small-Business-Relief-for-the-Purposes-of-Federal-Decree-Law-No.-47-of-2022-EN.pdf
- Ministerial Decision No. 126 of 2023 — General Interest Deduction Limitation Rule: https://mof.gov.ae/wp-content/uploads/2023/05/Ministerial-Decision-No.-126-of-2023-on-the-General-Interest-Deduction-Limitation-Rule-for-the-Purposes-of-Federal-Decree-Law-No.-47-of-2022.pdf
- Ministerial Decision No. 229 of 2025 — Qualifying and Excluded Activities (de minimis, Article 3): https://mof.gov.ae/wp-content/uploads/2025/09/EN-Ministerial-Decision-No.-229-of-2025-Regarding-Qualifying-Activities-and-Excluded-Activities.pdf
- FTA — VAT overview: https://tax.gov.ae/en/taxes/vat.aspx
