UAE Corporate Tax Explained: What Business Owners Need to Know
UAE corporate tax rates, the AED 375,000 threshold, free zone treatment, VAT registration limits, and what compliance actually involves.
The headline rates
UAE corporate tax applies at 0% on taxable profits up to AED 375,000, and 9% on profits above that threshold. The regime took effect for financial years starting on or after 1 June 2023.
The threshold is designed to keep small businesses and early-stage startups effectively outside the tax net while bringing the UAE in line with international tax standards.
How free zone companies are treated
Free zone companies are not automatically exempt. A qualifying free zone person may access a 0% rate on qualifying income, but this depends on meeting specific conditions — including maintaining adequate substance in the UAE and earning the right categories of income.
Getting this classification wrong is one of the more expensive mistakes available to a UAE business, because it is usually discovered after the fact. If your structure relies on free zone treatment, have it reviewed rather than assumed.
VAT is separate — and has its own thresholds
VAT is a distinct obligation from corporate tax. The standard rate is 5%.
- Registration is mandatory once taxable turnover reaches AED 375,000 in a 12-month period
- Voluntary registration is available from AED 187,500
- Registered businesses must file returns and maintain compliant records
There is still no personal income tax
The UAE does not levy personal income tax. Salaries, and dividends drawn by individuals, are not taxed personally. Corporate tax applies at the company level on business profits, which is a different thing entirely — a distinction that causes a lot of avoidable confusion.
What compliance actually involves
In practice, corporate tax compliance means registering with the Federal Tax Authority, maintaining proper accounting records throughout the year, and filing an accurate return. Businesses also need to keep Ultimate Beneficial Owner (UBO) records current.
The practical burden is less about the filing itself and more about bookkeeping discipline during the year. Companies that reconcile monthly find filing straightforward; companies that leave it to year-end usually do not.