The UAE introduced a federal corporate tax system in June 2023. If you have a business in Dubai, you need to understand how to calculate corporate tax. Whether you are running a mainland company, a free zone entity, or a multinational, knowing the right formula, adjustments, and exemptions can save you money and keep you compliant.
Basics of Corporate Tax in the UAE
Corporate tax is charged on the net income of companies after adjustments. The Ministry of Finance has set clear rules. Under Federal Decree-Law No. 47 of 2022 on the Taxation of Corporations and Businesses, with key clarifications in Ministerial Decision No. 73 of 2023 (Small Business Relief) and Ministerial Decision No. 139 of 2023 (Qualifying Free Zone Person & de-minimis).
Corporate tax in the UAE is simple once you break it down:
- 0% tax on profits up to AED 375,000
- 9% tax on profits above AED 375,000
- Small Business Relief: If revenue ≤ AED 3,000,000, you may elect relief (no CT on taxable income) for tax periods ending on or before 31 December 2026, subject to conditions (e.g., not part of a large MNE group).
- Multinational Companies: Big global groups may face special rules under the OECD Pillar 2 framework (to stop profit shifting)
Registration & who must register
Corporate Tax registration is required for juridical persons (companies) and for natural persons conducting a business when their business turnover exceeds AED 1,000,000 in a Gregorian calendar year. Certain exempt persons may also need to register if specified. Registration is how you claim reliefs and file your return on time.
The UAE Corporate Tax Formula
The general UAE CT formula looks like this:
Taxable Income = Accounting Net Profit (per IFRS)
- Non-Deductible Expenses – Exempt Income – Tax Reliefs (e.g., losses, credits)**
Corporate Tax = Taxable Income × 9% (if above AED 375,000)
How to Calculate Corporate Tax in Dubai
Here are simple steps you can follow to calculate the corporate tax in Dubai
Step 1: Start with Net Profit from Financial Statements
Financial statements must follow applicable accounting standards in the UAE (IFRS). IFRS for SMEs is permitted for entities with revenue ≤ AED 50 million, and a cash basis may be used where revenue ≤ AED 3 million (subject to conditions). Take your net profit before tax from your audited financial statements (prepared under IFRS).
Step 2: Adjust for Non-Deductible Expenses
Certain costs are not deductible for tax purposes. Must be added back, such as:
- Fines & penalties
- Bribes & illegal payments
- Entertainment above the 50% cap
- Donations not to approved charities
Step 3: Deduct Exempt Income
Some income is exempt, for example:
- Dividends from UAE companies
- Profits from foreign subsidiaries (if conditions met)
- Income from qualifying free zone transactions
Step 4: Apply Tax Reliefs
Apply tax reliefs, including tax loss relief: Carry forward tax losses to offset future taxable income. Transfer pricing rules and Tax loss relief (you can offset up to 75% of taxable income with carried-forward losses).
Step 5: Apply Corporate Tax Rate
- 0% on first AED 375,000
- 9% on the remainder
Example calculation:
Taxable Income = Net Profit + Non-Deductible Expenses – Exempt Income – Reliefs
Special Rules for Free Zone Companies
Dubai’s free zones (like JAFZA, DIFC, and DMCC) are attractive due to 0% tax on qualifying income. But rules are strict:
- Qualifying Income: Transactions with other free zone companies or overseas businesses.
- Non-Qualifying Income: UAE mainland income (unless minimal).
- De Minimis Rule: A Qualifying Free Zone Person can retain the 0% on qualifying income if non-qualifying income does not exceed the lower of (i) 5% of total revenue or (ii) AED 5,000,000 for the period.
If you wish to make your life easy, simply use our Corporate Tax Calculator for an estimate with a single click.
Filing Requirements Table
Here’s a quick guide to eligibility vs. filing obligations:
| Business Type | Corporate Tax Rate | Must Register? | Must File Return? |
|---|---|---|---|
| Mainland Co. (profit ≤ AED 375k) | 0% | Yes | Yes |
| Mainland Co. (profit > AED 375k) | 9% | Yes | Yes |
| Free Zone Qualifying Person | 0% on qualifying income | Yes | Yes |
| Small Business (Revenue ≤ AED 3m) | 0% (relief) | Yes | Yes |
| Large Multinational (OECD Pillar 2) | 15%(effective under the UAE Domestic Minimum Top-up Tax for in-scope groups) | Yes | Yes |
Foreign Tax Credits & Double Tax Treaties in the UAE
If your Dubai company earns income from outside the UAE. Then you may face taxation in the source country as well as under UAE corporate tax.
To avoid double taxation, the UAE corporate tax law allows:
1. Foreign Tax Credits
- Taxes paid in another country on the same income can be claimed as a credit against UAE corporate tax.
- The credit is limited to the lower of:
- The foreign tax paid, or
- The UAE Corporate Tax is otherwise payable on the same income(no refund of any excess foreign tax)
Example: If you paid 12% tax abroad, but UAE tax is 9%, you can only claim 9% credit (no refunds for excess foreign tax).
2. Double Tax Treaties (DTTs)
- The UAE has signed over 140 Double Tax Treaties (DTTs) with countries worldwide.
- These treaties reduce withholding tax on dividends, interest, and royalties and protect against being taxed twice on the same income.
- They also provide rules on residency, permanent establishments, and tax relief mechanisms.
Future Outlook for UAE Corporate Tax
The UAE corporate tax regime is still in its early stages, and further corporate tax updates are expected in 2025.
Businesses in Dubai should keep an eye on the following developments:
- OECD Pillar Two Implementation: Large multinational groups with global revenues above EUR 750 million will gradually see greater alignment with the OECD’s Global Minimum Tax (15%). The UAE may introduce additional domestic minimum top-up tax measures in line with global standards.
- Free Zone Guidance Updates: The Federal Tax Authority (FTA) is expected to issue more clarifications on what constitutes qualifying vs. non-qualifying income in free zones. This will directly impact businesses trading with the mainland.
- Digital Transformation of Filing: The UAE continues to invest in tax technology. Expect greater automation, digital submission tools, and possibly real-time reporting requirements in the future.
- Expansion of Relief Schemes: Current Small Business Relief is available until 31 December 2026. Policymakers may review whether to extend or phase out this measure depending on economic conditions.
- Increased Enforcement: As compliance matures, the FTA is likely to increase audits and enforce stricter penalties for misreporting or late filings. Companies must ensure accurate bookkeeping and documentation.
Staying proactive and monitoring these changes can help businesses in Dubai remain compliant, optimize tax planning, and maintain competitiveness.
How the UAE Corporate Tax Impacts Businesses
Under the new corporate tax rules, you must register and submit an annual corporate tax return to the FTA. This requires maintaining proper books and records. Otherwise, it can lead to penalties and fines.
Moreover, with 9% of tax, your company might start feeling the extra financial burden. Here are the tips you can follow for the management solution.
- Firstly, you need to identify tax-deductible expenses. You have to manage your cash flow in real time. It helps you to optimize your tax strategy and increase your savings.
- It allows you to save your time and money. However, reduce potential errors in tax filing so you can focus more on your core business operations.
- Also, you will gain valuable insight into your company’s spending.
- It helps to promote accuracy and compliance. By maintaining records, you can avoid penalties. This can save you from costly mistakes and reduce stress.
If you are looking for corporate expense management to expand your business, get in touch with us.
Compliance & Deadlines
- Tax Period: Usually the financial year (Jan–Dec or custom).
- Filing Deadline: 9 months after year-end.
- Transfer Pricing Documentation: Required for related-party dealings.
- Penalties: Late filing fines, incorrect return penalties, and tax underpayments.
Professional filing with Bestax Corporate Tax Services ensures compliance.
Corporate tax in Dubai is new, complex, and full of rules. The rules for qualifying income, free zone benefits, and IFRS adjustments can be tricky. Mistakes can cost your business thousands in fines or penalties,
Let the experts at Bestax help you with:
- Taxable income calculation
- Free zone vs mainland income separation
- Tax loss relief & credits
- Filing on time
Ready to Calculate Your Corporate Tax the Right Way? Use the Corporate Tax Calculator to get an estimate today.
Quick FAQs
How is corporate tax calculated in the UAE?
It starts with net profit per IFRS, adjusts for non-deductible expenses, exemptions, and reliefs, then applies the 0%/9% tax rates.
How do you determine taxable income for UAE corporate tax?
To determine the taxable income, you can take the accounting profit. Add back non-deductible items, deduct exempt income, and adjust for losses or credits.
What adjustments are needed when calculating corporate tax?
Typical adjustments include fines, excessive entertainment, exempt dividends, and transfer pricing corrections.
How do free zone companies calculate corporate tax?
The free zone companies pay 0% on qualifying income but must apply 9% on non-qualifying mainland income above the de minimis rule.
What qualifies as taxable income in the UAE?
Taxable income includes profits from UAE operations, non-qualifying free zone income, and adjusted IFRS profit.
How do you split qualifying and non-qualifying income?
Maintain separate accounts for the free zone vs the mainland. Applying 0% to qualifying and 9% to non-qualifying.
Disclaimer: The information provided in this blog is for general informational purposes only. For professional assistance and advice, please contact experts.
