What Is Corporate Tax In The UAE?

Corporate Tax in the UAE is a federal direct tax levied on the net profits of businesses, standardly applied at a 9% rate on taxable income exceeding AED 375,000, and a 0% rate for income up to this threshold to support small enterprises.

Transitioning from a zero-tax environment before 2023 to today’s regulatory landscape is a major adjustment for any UAE business owner. Established by Federal Decree-Law No. 47 of 2022, the new framework mandates that the FTA tax corporate profits. Ignoring this shift is a compliance risk, but with the right guidance, the transition is completely manageable.

Before 2023, most companies in the UAE did not pay federal corporate income tax. The new regime changes that, but it still keeps tax rates relatively competitive compared to many other countries.

For companies in Abu Dhabi, the rules apply the same as they do across the UAE. Mainland businesses, Free Zone companies, and certain foreign entities with operations in the country all need to evaluate whether they fall within the regime.

One of the biggest reliefs for business owners is learning that the UAE Corporate Tax applies strictly to your net taxable profits, not your total gross revenue. The calculation begins with your standard accounting profit, prepared under IFRS, and is then refined through specific statutory adjustments.

UAE Corporate Tax Rates And Thresholds

The UAE applies a 0% corporate tax rate on your first AED 375,000 of taxable income, and a standard 9% rate on any profit exceeding that threshold. This structure was defined under Cabinet Decision No. 116 of 2022, balancing economic competitiveness with greater financial transparency.

Standard Rate
9%
On taxable income above AED 375,000. Applies to most DED-licensed mainland businesses.
Small Business
0%
On taxable income up to AED 375,000. Supports early-stage companies and SMEs during growth.
Free Zone (QFZP)
0%
On qualifying income only. Must meet economic substance, qualifying activities, and de minimis rules.

Free Zone (0%)

Operating in a UAE Free Zone no longer guarantees an automatic tax exemption, but protecting your tax-free status is entirely possible. You can still secure the 0% Corporate Tax rate on your profits, provided your business strictly meets the Federal Tax Authority’s criteria to become a Qualifying Free Zone Person (QFZP).

This isn’t just about holding a Free Zone license anymore. To keep your 0% rate safe, you must actively prove that your company carries out “Qualifying Activities,” demonstrate genuine economic substance within the Free Zone, track revenue to stay within the limits for non-qualifying income, and back up transactions with compliant Transfer Pricing documentation.

Pillar Two (DMTT)

The DMTT, effective for financial years starting on or after January 1, 2025, is strictly designed for massive multinational enterprises (MNEs). Specifically, it only targets corporate groups with global consolidated revenues exceeding EUR 750 million. For the vast majority of UAE businesses, your focus should remain solely on the standard 9% (or 0%) Corporate Tax regime.

How Your Taxable Income Is Calculated

The FTA does not just want a final number — they require absolute transparency. Every adjustment made between your accounting profit and your taxable income must be fully justified during a tax audit. Partnering with a professional tax consultant in Abu Dhabi ensures your calculations are not only accurate but fully supported by compliant documentation.

01

Determine Your Accounting Profit

Before applying any tax laws, you start with the net profit reported in your company's financial statements. These statements must be prepared under internationally recognised standards, such as IFRS. This figure reflects your raw revenues, operating costs, and financing expenses.
02

Apply Mandatory FTA Adjustments

This is where accounting profit diverges from taxable income. The FTA requires you to adjust your baseline according to strict corporate tax rules. Common adjustments include: non-deductible expenses, connected transaction adjustments to meet the arm's length standard, and capped deductions.
03

Apply Reliefs and Exemptions

Once adjustments are applied, determine if your business qualifies for any reliefs — such as Small Business Relief, participation exemptions, or Free Zone qualifying income treatment — to arrive at your final taxable income figure.
04

Calculate Tax Payable

Apply the applicable rate (0% up to AED 375,000; 9% above) to your taxable income to determine your corporate tax liability for the period. This amount is due within 9 months of your financial year-end.

Corporate Tax Treatment By Business Type

Different types of businesses operating in the UAE may fall under different corporate tax treatments depending on their legal structure, revenue levels, and regulatory status.

Business Type Corporate Tax Treatment Key Conditions Practical Impact
Small businesses & startups 0% corporate tax on taxable income up to AED 375,000 Must meet taxable income threshold; may elect Small Business Relief if eligible Supports early-stage companies and SMEs during growth
Standard UAE mainland companies 9% corporate tax on taxable income above AED 375,000 Applies to most DED-licensed businesses in Abu Dhabi and across the UAE Main corporate tax regime for UAE businesses
Qualifying Free Zone Persons (QFZP) 0% corporate tax on qualifying income Must perform qualifying activities, maintain economic substance, and meet de minimis rules Allows Free Zone companies to maintain preferential tax treatment
Large multinational enterprises Subject to the Pillar Two global minimum tax framework Applies to multinational groups with global revenues ≥ EUR 750 million Ensures minimum global tax rate compliance (15%)

Entities Exempted From Corporate Tax In Abu Dhabi

While most businesses operating in the UAE fall within the corporate tax regime, the law provides specific exemptions for certain categories of entities. These exemptions are defined under the corporate tax legislation and apply only when the entity satisfies the eligibility requirements established by the Federal Tax Authority.

Entities that may qualify for corporate tax exemption include:

  • Government entities operating as part of federal or emirate-level administration
  • Government-controlled entities performing public functions or strategic economic activities
  • Qualifying public benefit entities, such as certain non-profit organisations approved by the authorities
  • Extractive businesses, including companies engaged in natural resource extraction already subject to emirate-level taxation
  • Certain non-extractive natural resource businesses under specific regulatory frameworks

Although these entities may qualify for exemption, the status is not automatic in all cases. Organizations must confirm eligibility and maintain the conditions required by the law. Businesses seeking exemption should carefully review the official Federal Tax Authority guidance and ensure their activities meet the criteria established under the UAE corporate tax framework.

Documentation Needed For UAE Corporate Tax Compliance

Companies subject to UAE corporate tax must maintain complete and accurate documentation to support their tax calculations and filings. The Federal Tax Authority may request these records during compliance checks or tax audits.

Key documents typically required for corporate tax compliance include:

  • Financial statements prepared according to IFRS or other accepted accounting standards
  • Corporate tax computation workpapers showing adjustments from accounting profit to taxable income
  • Transfer pricing documentation where related-party transactions exist
  • Supporting schedules and reconciliations used in preparing the corporate tax return
  • Records of transactions, invoices, and contracts relevant to the company’s activities

Under UAE corporate tax regulations, businesses must generally retain corporate tax records for at least seven years from the end of the relevant tax period. Maintaining organised documentation not only supports accurate filings but also ensures that companies are fully prepared if the Federal Tax Authority requests evidence during an audit or compliance review.

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