Corporate tax in the UAE applies a 9% flat rate on taxable profits, effective June 1, 2023. Understanding the exemptions, thresholds, free zone regimes (QFZP), and reporting obligations is essential for compliance and optimization.
UAE Corporate Tax (Federal Decree-Law No. 47/2022) applies at 9% on taxable income exceeding AED 375,000. Free Zone entities qualifying for QFZP status pay 0% on qualifying income, subject to the de minimis rule (5% or AED 5M). Since 2025, the DMTT (OECD Pillar Two) imposes a 15% minimum effective rate on groups with consolidated revenue above EUR 750M.
The federal regime applies a uniform rate of 9% on annual taxable profit of corporations. However, a substantial exemption has been implemented: no tax is due on annual profits not exceeding AED 375,000. This exemption applies to the first full fiscal year beginning June 1, 2023 or later.
Taxable profit is calculated by deducting necessary and legally permitted business expenses from revenue. Elements to consider include overhead, financial charges, depreciation, deductible provisions, and prior-period losses. The absence of initial tax credit for exemption years requires prudent planning when crossing above or below the AED 375,000 threshold.
The Qualified Free Zone Person (QFZP) regime is a Corporate Tax regime applicable to a Qualifying Free Zone Person meeting the conditions of Article 18 of the Corporate Tax Law and its implementing decisions. It is not a general personal income tax exemption. The rate is 0% on Qualifying Income and 9% on Taxable Income that is not Qualifying Income. Essential conditions include:
QFZPs benefit from 0% tax rate on qualifying income and 9% on non-qualifying income. This distinction is critical: income from qualifying activities (see below) is entirely exempt from federal tax, while other income is taxed at the standard rate.
The de minimis requirement is satisfied when the non-qualifying revenue derived by the Qualifying Free Zone Person does not exceed 5% of total revenue for the period or AED 5,000,000, whichever is lower. If this condition is not met, QFZP status may be withdrawn for five years. This rule incentivizes free zones to maintain substantial operational activity and avoid pure financial or holding positioning.
Cabinet Decision No. 100/2023 et Cabinet Decision No. 265/2023 lists activities benefiting from 0% QFZP status, including:
Certain activities cannot benefit from QFZP status, notably:
Any entity engaged in economic activity in the UAE must register with the Federal Tax Authority (FTA) within the deadlines specified by taxpayer category per FTA Decision No. 3 of 2024. Corporate Tax registration deadlines cannot be reduced to a uniform 30-day rule from the start of business. They depend on the category of taxpayer and, for many resident juridical persons, on the date of licence issuance, in accordance with clarifications published by the Federal Tax Authority. Failure to register within the prescribed deadlines may result in an administrative penalty of AED 10,000, subject to subsequent waiver mechanisms where FTA-published conditions are met, and inability to deduct business expenses.
Tax returns must be filed with the FTA within 9 months following the close of the fiscal year. This return must be accompanied by audited financial statements for entities whose income exceeds regulatory thresholds. Certain exemptions apply to micro-enterprises below specified revenue thresholds.
Cabinet Decision No. 75 of 2023 establishes a comprehensive sanctions regime for non-compliance:
Businesses must retain for 5 years:
The United Arab Emirates has joined the OECD Pillar Two inclusive solution on taxation of large multinational enterprises. The Domestic Minimum Top-up Tax (DMTT) of 15% applies from January 1, 2025 per Cabinet Decision No. 142/2024. This provision ensures that any income of a multinational entity subject to an effective tax rate below 15% will be topped up to 15% in the UAE.
The DMTT applies only to economic groups whose consolidated annual revenue exceeds EUR 750 million. SMEs and small- to medium-sized domestic enterprises are unaffected, preserving UAE attractiveness for mid-sized structures.
For entities operating at federal level in the UAE at 9%, the DMTT rarely presents additional burden unless other group jurisdictions apply lower rates. However, for QFZPs enjoying 0% on qualifying income, Pillar Two may generate additional top-up tax obligation if the group is multinational and sufficiently large.
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Book a consultationUnlike corporate tax applying to legal entities, individuals are not ordinarily subject to federal corporate tax in the UAE. However, Cabinet Decision No. 49/2023 introduced a threshold rule: an individual engaged in commercial activity is deemed to form a separate entity (and therefore subject to corporate tax) once annual revenue exceeds AED 1 million.
Freelancers, consultants and service providers whose activity remains below the AED 1 million threshold are not subject to federal corporate tax. They remain subject to commercial registration and local licensing fees (Dubai Department of Economic Development or equivalent) but are not fiscally subject to corporate tax.
Upon the death of an individual, heirs who continue economic activity without creating a new legal entity remain subject to individual rules, with application of the AED 1 million threshold. Successors must update their FTA registration.
Your tax situation is unique. Whether you operate in a free zone or mainland, exceed the AED 375,000 profit threshold, or are considering restructuring, GEOTAX helps you understand your obligations and identify legal optimization opportunities.