UAE corporate tax rate, incentives, filing dates, and compliance explained

Why expand to the UAE?

The United Arab Emirates' corporate tax regime is said to be among the most competitive, offering lucrative support for small and medium-sized enterprises. It's also credited with contributing to the UAE's rise as a prime destination for global businesses.

Apart from low corporate tax rates and the absence of any personal income tax, foreign investors are enticed to expand operations to the UAE because of its Free Zones, which come with incentives like full foreign ownership, exemptions from duties and taxes, and 100% profit repatriation.

There's also the UAE's strategic location, which makes it an invaluable trade route connecting East with West. The rapid expansion of sectors such as technology, healthcare, education, and financial services means there are opportunities for a variety of businesses. The UAE ranks a high 16th in the World Bank's Ease of Doing Business index, making it one of the most rapidly growing, high-potential global markets today.

UAE corporate tax

The United Arab Emirates has the second-lowest corporate tax rate in the Gulf Cooperation Council (GCC) area after Bahrain. Apart from a standard corporate tax rate of 9%, it offers a 0% rate for businesses below a specific taxable income threshold. Both the low standard rate and zero rate, therefore, make the UAE an attractive destination for small businesses seeking to grow globally.

If you happen to be any one of the following, you are subject to corporate tax in the UAE:

• A company or individual conducting business activity in the UAE under a commercial licence
  
• A free zone company, which is a business in a designated area operating under special regulations
  
• A foreign company or individual conducting trade or business in a regular manner
  
• Engaged in banking operations
  
• A company involved in real estate management, construction, development, agency and brokerage activities.
  

The following entities are exempt from corporate tax:

• UAE government entities and government-controlled entities
  
• Persons engaged in the extractive business in the UAE
  
• Persons engaged in non-extractive natural resources business in the UAE
  
• Qualifying public benefit entities
  
• Qualifying investment funds
  
• Qualifying public or private pension or social security funds
  
• Juridical persons incorporated in the UAE that are wholly owned by exempt persons
  
• Any other person determined by the Cabinet.
  

In the UAE, a resident person may be:

• One who is incorporated or recognised under the country's tax laws as such,
  
• A foreign juridical person controlled or managed in the UAE, or
  
• A natural person conducting business in the UAE.
  

In contrast, a non-resident doesn't qualify as a resident person but has a permanent establishment in the UAE, derives UAE-sourced income, or earns income from immovable property in the UAE. Resident persons are subject to corporate tax on their worldwide income, and non-resident juridical persons on income attributable to a permanent establishment or UAE-sourced income.

The Federal Tax Authority handles tax administration in the Emirates.

Tax rates and structures

As stated above, the UAE has two corporate income tax rates:

• A 9% standard rate on taxable income exceeding AED 375,000.
  
• A 0% rate on taxable income below this threshold.
  

However, a company's UAE corporate tax liability may differ in the following scenarios:

• If it's a multi-national with consolidated global revenues of 750 million euros or more, it will instead be subject to a 15% Domestic Minimum Top-up Tax (DMTT).
  
• If it's a branch of a foreign bank, it might be taxed at a higher rate of 20% under the old Emirate-level bank decrees.
  
• If it's an extractive business (engaged in the extraction of upstream oil and gas), it might be subject to older Emirate-level negotiated taxes at varying rates.
  

There are special considerations on corporate tax for businesses operating from the UAE's more than 50 Free Zones as well. If such a business fulfils the criteria to be a Qualifying Free Zone Person (QFZP), it benefits from 0% corporate tax on qualifying income. However, non-qualifying income is taxed at the standard 9% corporate tax rate, even for Free Zone entities.

To be a Qualifying Free Zone Person, one must:

• Be incorporated, established, or registered in a Free Zone
  
• Maintain adequate substance (assets, employees, operating expenses, etc.) in a Free Zone
  
• Earn qualifying income
  
• Not elect to be part of the standard UAE corporate tax regime
  
• Abide by transfer pricing rules and documentation requirements
  
• Prepare audited financial statements meeting International Financial Reporting Standards
  
• Ensure its non-qualifying revenue (earnings from excluded activities) is not more than 5% of its total revenue or AED 5 million, whichever is lower.
  

What is taxable income?

In the UAE, corporate income tax is a direct tax levied on net income or business profits (which is why it is also called business profits tax).

To calculate taxable income, take your company's net profit (or loss) and subtract all allowable deductions and exempt income. Deductible expenses include:

• Business expenses, such as salaries, rent, and utilities
  
• Marketing and advertising expenses
  
• Professional services fees
  
• Interest on business loans
  
• Incorporation and licensing fees and start-up expenses
  
• Donations to approved charities
  
• Entertainment expenses (up to 50%)
  
• Depreciation costs (with limitations).
  

Income exempt from corporate tax includes dividends and capital gains earned from qualified shareholdings.

The result is your annual taxable profits, to which you apply the applicable corporate tax rate.

Historical tax rates and recent reforms

Corporate tax in the UAE is a fairly recent occurrence. Making the transition from a tax-free regime, the UAE announced in 2022 its decision to introduce corporate tax at the rates of 0% and 9%, making the tax effective from financial years starting on or after June 1, 2023.

Then, in 2025, it introduced the Domestic Minimum Top-up Tax (DMTT) in alignment with global standards – another major reform.

Tax incentives and exemptions

A major tax incentive in the UAE is tax relief by way of 0% corporate tax for Qualifying Free Zone Persons. Here are a few more relevant business incentives:

• Small business incentive: Resident persons with less than AED 3 million in revenue may choose to be treated as not having any taxable income. This incentive is available to small businesses up till December 2026.
  
• Foreign tax credit: A tax credit against foreign taxes paid on a UAE taxable person's income is available, limited to the amount of UAE corporate tax due on it.
  
• Business restructuring: Resident persons and non-resident persons with a permanent establishment can benefit from tax relief on mergers and other corporate restructuring.
  
• Incentives in the pipeline: The UAE is considering rolling out expenditure-based tax credits ranging from 30% to 50% for businesses engaged in R&D, as well as refundable tax credits for companies hiring high-value employees.
  

When to file tax returns

All taxable persons must register with the Federal Tax Authority for UAE corporate tax within a prescribed period and obtain a Corporate Tax Registration Number through the Emara Tax portal.

To ease tax obligations, the UAE requires a taxable person to file just one UAE corporate tax return, due within nine months from the end of the taxable period. The corporate tax due must also be paid by this deadline.

All corporate taxes are to be paid in AED.

Reducing tax burden with double taxation agreements

The UAE is actively expanding its network of double taxation treaties and has signed 193 so far, including one with Singapore. These treaties aim to prevent the same income from being taxed in two jurisdictions, exempt or reduce taxes, and prevent tax evasion.

The Singapore-UAE “Multilateral Instrument—first signed in 1995 and ratified in 2018-19—provides protection from dual taxation in the form of tax deductions for tax paid in Singapore for UAE resident persons and tax credits against tax paid in the UAE for Singapore companies.

The treaty also stipulates zero or reduced withholding tax on income from dividends, interest, and royalties. It makes a provision for 0% withholding tax on dividends and interest payments between the two countries and a reduced withholding tax rate of 5% on royalties.

Also, if either country offers more favourable tax incentives under its own laws, then those take precedence over the treaty provisions, ensuring the best possible outcome for businesses.

Tax treatment of dividends in the UAE

In its bid to reduce tax burden, the UAE charges withholding tax at the rate of 0% on dividends received by non-resident persons from UAE resident persons, as long as the income is not attributable to the non-resident person's permanent establishment.

In addition, royalty payments and professional services fees to non-resident persons also benefit from 0% withholding tax, encouraging the use of global intellectual property resources and enabling foreign collaborations in the UAE.

Other taxes in the UAE

Apart from corporate tax, businesses in the UAE might be subject to these taxes:

VAT

Value-added tax (VAT) is imposed on most goods and services at the standard rate of 5%. However, certain goods and services attract 0% VAT or are VAT-exempt. The 0% VAT rate applies to international transportation, crude oil and natural gas supplies, healthcare, education, and exports to countries outside the Gulf Cooperation Council. Goods and services exempt from VAT include certain financial services and domestic transportation. Trade in goods between companies in Free Zones might also be eligible for VAT exemption.

Customs duty

Certain imports into the UAE attract customs duty. While the general customs duty rate is 5%, some imports attract higher rates, such as alcohol (50%) and tobacco (100%).

Excise duty

The UAE imposes excise duty on goods considered harmful to human health and the environment such as tobacco products (100%), fizzy drinks (50%), sweetened drinks (50%), and e-cigarettes (100%).

Municipal or property tax

Most of the emirates in the UAE impose a property tax based on annual rental value. This tax is usually paid by the tenant, though a separate fee might be applicable to the property owner as well.

Tax compliance and registration

Follow these steps to stay tax-compliant in the UAE:

• Fulfil registration requirements: Tax compliance begins with registering with the Federal Tax Authority and obtaining a Corporate Tax Registration Number. Remember that even certain exempt persons might be required to register for corporate tax in the UAE.
  
• Don't forget filing and payment deadlines: This should be easy given that companies in the UAE only need to file an annual corporate tax return. The deadline for filing and tax payment is within nine months of the end of the relevant tax period.
  
• Avoid late fees and penalties: Failing to register, file returns, or pay taxes on time leads to fines and penalties.
  
• Keep proper records: Taxable persons are required to prepare financial statements that adhere to International Financial Reporting Standards. The statements of QFZPs and taxable persons earning more than AED 50 million in revenue in a relevant tax period will be audited.
  

How Aspire can help your expansion into the UAE

Expanding your business globally needs a strong financial services platform, and Aspire is just that. Here's what joining our platform gets your company:

• A multi-currency business account that allows you to receive and make payments in 30+ currencies across more than 130 countries
  
• Authentic business savings with our market-leading FX rates, low and transparent pricing, and attractive cash back offers
  
• Fast and easy global payments with same-day transfers in 15+ currencies, plus currency conversions shown up-front so there are no nasty surprises
  
• Smart accounting integrations for automated, error-free, and optimised record-keeping and workflows.
  

Frequently Asked Questions

Who must pay the UAE corporate tax?

Corporate tax in the UAE applies to all businesses and individuals, including foreign entities, engaged in business in the country.

What is 15% tax in the UAE?

The 15% tax in the UAE is the Domestic Minimum Top-up Tax (DMTT) that large multinationals are subject to instead of the standard 9% corporate tax.

Is UAE 100% tax-free?

While the UAE doesn't have a personal income tax, it does charge corporate tax on business profits.

How to calculate UAE corporate tax?

To calculate corporate tax in the UAE, start with net income and subtract all deductible expenses and exempt income, then apply the appropriate corporate tax rate.

What is UAE VAT and corporate tax?

In the UAE, corporate tax is a direct tax levied on companies' taxable income at the rate of 9% or 0%, while VAT is an indirect tax imposed on most goods and services at the rate of 5%.