Corporate tax is a new reality for businesses in the UAE. It is a direct tax on the net profit of companies and business entities. This system started on June 1, 2023, and it marks a big step in the UAE’s approach to business and finance.
If you’re running a business, are a freelancer, or are just curious about how much corporate tax is in the UAE, this blog will help. We’ll explain what the UAE corporate tax is, who pays corporate tax in the UAE, and how it works. We’ll keep it simple and clear.
What is Corporate Tax?
Corporate tax (CT) is a tax on the profit businesses make. This means if a company earns money after expenses, a part of that income goes to the government. In the UAE, this is now called the UAE corporate tax.
The system is based on Federal Decree-Law No. 47 of 2022, which was updated by Federal Decree-Law No. 60 of 2023. It applies to most businesses in the UAE. The Federal Tax Authority (FTA) is in charge of managing, collecting, and enforcing this tax.
You can register and file tax returns on the EmaraTax portal, which is managed by the FTA. They also provide guides to help businesses stay compliant.
Why Corporate Tax was Introduced
The UAE introduced corporate tax rules to:
- Grow as a global business hub
- Push its economic development
- Meet international tax standards
By applying corporate tax, the country aims to stay strong and competitive in the global market. At the same time, it ensures fair tax practices and transparency.
This change connects to the UAE’s larger goals. As more companies set up in the region, a fair and clear tax system helps maintain trust.
Who Pays Corporate Tax in the UAE?
Let us break it down. Corporate tax in the UAE applies to:
- Companies based in the UAE (mainland or free zone)
- Foreign companies that regularly do business in the UAE
- Individuals doing business under a trade license
- Freelancers who meet the income threshold
The tax does not apply to:
- Employees earning a salary
- People earning interest from bank accounts
- Individuals owning property for personal use
- Foreign investors earning passive income like dividends or royalties
This makes it clear that the UAE tax for companies is focused on business income, not personal income. This is important for freelancers, small business owners, and large companies alike.
Scope of UAE Corporate Tax
The corporate tax applicability in the UAE covers various activities:
- Businesses with a commercial license
- Banks and financial institutions
- Real estate agencies and brokers
- Free zone companies (with specific rules)
- Foreign companies doing regular business in the UAE
Free zone businesses can still enjoy tax benefits if they follow the rules. These benefits are known as free zone incentives. However, if they do business with the mainland, they might lose some of these benefits.
Who is Exempt from UAE Corporate Tax?
Some entities do not have to pay corporate tax. This is called the corporate tax exemption UAE. These include:
- Companies involved in natural resource extraction (follow Emirate-level taxes and may qualify for a corporate tax penalty waiver)
- Businesses earning dividends or capital gains from qualifying investments
- Intra-group transfers and restructures (if rules are followed)
- Individuals earning only a salary
- People earning income from bank savings or investment in shares
This helps separate business income from personal income. It also supports investors and keeps things simple for people who are not running a business.
UAE Corporate Tax for Small Businesses and Freelancers
There’s good news for small business owners and freelancers. If your taxable income is below AED 375,000, the corporate tax rate is 0%. This threshold is known as the corporate tax threshold UAE.
Once your business earns above this level, the UAE business tax rate becomes 9%. This is one of the lowest tax rates globally, making the UAE attractive for new businesses and startups.
So if you’re wondering how much is corporate tax in UAE, here’s the answer:
- Income up to AED 375,000 = 0% tax
- Income above AED 375,000 = 9% tax
This makes the system easy to understand and plan for. Freelancers and small business owners should monitor their income to see when the 9% tax will apply.
Resident vs Non-Resident Taxpayers
The tax law separates people and businesses into resident and non-resident persons.
- A resident is taxed on income earned both inside and outside the UAE
- A non-resident is only taxed on income earned inside the UAE
Your residence status doesn’t depend on your visa or location. It depends on your business activity and how it’s managed.
If you’re a non-resident and you don’t have a permanent establishment in the UAE, you won’t be taxed like regular companies. In some cases, a withholding tax of 0% may apply.
How is Corporate Tax Calculated?
The tax is based on taxable income. This is your business profit after allowed adjustments. Businesses must calculate this every year and submit a corporate tax return to the FTA.
The calculation starts with your profit (based on your financial records). Then, you adjust for things like:
- Non-taxable income
- Non-deductible expenses
This gives your final taxable income, which is what the 9% rate applies to (if above AED 375,000).
All businesses must follow their financial reporting period when preparing their tax returns. To simplify this process, many companies use a corporate tax calculator to estimate their payable tax before filing.
UAE Corporate Tax Compliance and Registration
All businesses falling under the law must:
- Register for corporate tax through the EmaraTax portal
- Keep proper financial records
- File annual returns
- Pay tax on time
This process is called corporate tax compliance. It ensures that companies pay what they owe, avoid penalties, and stay legally safe.
Even if your business earns less than AED 375,000, you may still need to register for corporate tax. Not all businesses will need to pay tax, but many must still register and report.
Understand UAE Corporate Tax 2025
The introduction of corporate tax in the UAE is a major change. But it’s designed to support fair business practices while keeping the country attractive to investors:
- The UAE corporate tax rate is 9% for income above AED 375,000
- Small businesses and freelancers earning below the threshold pay 0%
- Certain entities and incomes are exempt from corporate tax
- Both mainland and free zone companies are subject to the law
- Businesses must register and report through the EmaraTax portal
- The Federal Tax Authority (FTA) handles all matters related to tax
Whether you’re a small business, a freelancer, or managing a large firm, understanding these rules will help you stay prepared.
If you’re still unsure, it’s best to consult a tax advisor or check the official FTA website for updates and detailed guides.
Quick FAQs
1. What is the corporate tax rate in the UAE?
The corporate tax rate in the UAE is 9% on taxable income above AED 375,000. Income below this amount is taxed at 0%.
2. Who is required to pay corporate tax in the UAE?
Companies registered in the UAE, foreign businesses with a permanent presence, and individuals doing business under a trade license must pay corporate tax. Employees and those earning only personal investment income are not taxed.
3. Is corporate tax applicable to free zone companies in the UAE?
Yes, free zone companies are subject to corporate tax but may qualify for a 0% rate if they meet certain conditions. They must not do business with the mainland and must follow all compliance rules.
4. Do freelancers and sole proprietors need to pay UAE corporate tax?
Freelancers and sole proprietors must pay corporate tax if their business income exceeds AED 375,000. Below that threshold, the tax rate is 0%.
5. When does corporate tax come into effect in the UAE?
Corporate tax applies from the start of a business’s first financial year on or after June 1, 2023. All businesses must register with the Federal Tax Authority.
6. How is the 9% tax calculated?
The 9% tax is calculated on net profit after adjustments, based on financial statements. Only income above AED 375,000 is taxed.
7. What businesses are exempt from corporate tax in the UAE?
Businesses involved in natural resource extraction and those earning qualifying dividends or capital gains are exempt. Also, certain group transactions and personal income from shares or property are not taxed.
Disclaimer: The information provided in this blog is for general informational purposes only. For professional assistance and advice, please contact experts.
