tax & finance / uae tax rates
UAE corporate tax rates and thresholds explained
01_introduction
UAE corporate tax runs on two numbers that founders consistently mix up: the AED 375,000 threshold that separates the 0% and 9% bands, and the 0% rate available to qualifying free zone income, which is a completely different mechanism with its own conditions. Getting these two confused is the single most common source of an unexpected tax bill once a return is actually being prepared.
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What is the current UAE corporate tax rate and who actually pays 9 percent?
What is the current UAE corporate tax rate and who actually pays 9 percent?
Standard UAE corporate tax is 0% on taxable income up to AED 375,000, and 9% on taxable income above that threshold. Every mainland company applies this rate structure to its full taxable income.
A free zone company applies it only to income that does not qualify for the separate 0% Qualifying Free Zone Person rate, covered below, so a free zone company can end up paying 9% on some of its income and 0% on the rest within the same tax period.
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The AED 375,000 threshold in practice
The AED 375,000 threshold in practice
The threshold applies at the level of the taxable person, the company itself, not per shareholder or per owner. It is a flat cut-off rather than a sliding scale: the first AED 375,000 of taxable income is taxed at 0%, and only the amount above that is taxed at 9%. A company with AED 1,000,000 in taxable income pays 9% on AED 625,000, not on the full AED 1,000,000.
The threshold resets each tax period. A group with multiple UAE entities does not get one shared threshold across the group by default, each taxable person is assessed against its own AED 375,000 band, unless the entities have specifically elected to form a tax group, which changes how the threshold and the group’s combined income are assessed.
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Can a free zone company still qualify for 0 percent corporate tax?
Can a free zone company still qualify for 0 percent corporate tax?
Yes, but only as a Qualifying Free Zone Person, and only on qualifying income. QFZP status depends on maintaining adequate economic substance in the free zone, deriving income from qualifying activities, and keeping non-qualifying income under a defined ceiling, the lower of 5% of total revenue or AED 5,000,000, under Cabinet Decision No. 100 of 2023. Breach either limit and the entity loses QFZP status, along with the 0% rate, for that tax period and the following four.
A worked example. A free zone trading company with AED 20,000,000 in annual revenue has a non-qualifying revenue ceiling set by the 5% test, since 5% of AED 20,000,000 is AED 1,000,000, which is lower than the flat AED 5,000,000 cap, so the 5% figure governs.
If AED 900,000 of that revenue comes from mainland-sourced sales, the company stays under the ceiling: 0% on the qualifying AED 19,100,000, and 9% on the AED 900,000 above the AED 375,000 threshold.
If mainland-sourced revenue instead reaches AED 1,200,000, the company breaches the 5% ceiling entirely, loses QFZP status, and the 9% rate applies to its full taxable income above AED 375,000 for that year and the following four.
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Registration deadlines and penalties
Registration deadlines and penalties
Registration is a one-time step tied to incorporation date, separate from filing and separate from the rate question entirely. A resident company incorporated on or after 1 March 2024 has three months from incorporation to register, under FTA Decision No. 3 of 2024. Companies incorporated before that date follow a different, staggered schedule tied to the month their original licence was issued.
Missing the registration deadline carries a fixed penalty of AED 10,000, under Cabinet Decision No. 10 of 2024. There is no separate statutory grace period, but the penalty is waived if the company files its first corporate tax return within seven months of the end of its first tax period, rather than the usual nine. Filing is a separate, annual obligation, due regardless of whether any tax is owed for that period.
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Getting your rate position confirmed
Getting your rate position confirmed
The mechanics above are the rules. Which of them actually apply to a specific company, whether QFZP status holds up, whether a tax group election changes the threshold calculation, depends on the full structure behind it, not the rate table in isolation.
GCG confirms this as part of mapping the group first, covered on Tax & Finance, rather than answering the rate question in isolation from the rest of the structure.
Worried your structure might breach the QFZP threshold or miss a registration deadline?
Talk to GCG before it becomes a penalty.
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Does small business relief apply automatically or does a company need to elect it?
It must be elected, it does not apply automatically. Under Article 21 of Federal Decree-Law No. 47 of 2022, a resident person with revenue at or below AED 3,000,000 in the current and all previous tax periods can elect to be treated as having no taxable income for that period. The election has to be made explicitly on each tax return, and re-elected every period it is wanted. A company that qualifies but forgets to elect it is simply taxed under the standard 0%/9% rules for that period.
Small Business Relief is also temporary: it is only available for tax periods ending on or before 31 December 2026, under Ministerial Decision No. 73 of 2023, and Qualifying Free Zone Persons and large multinational group members cannot elect it at all. Registration and filing remain mandatory whether or not the relief is elected.
How is corporate tax calculated for a company with mixed mainland and free zone income?
The company’s non-qualifying income, which includes mainland-sourced revenue above the free zone’s permitted threshold, is separated from its qualifying income. Qualifying income continues to benefit from the 0% QFZP rate. Non-qualifying income is taxed under the standard 0%/9% structure above the AED 375,000 threshold, exactly as it would be for a mainland company. The worked example above shows this split in practice.
What happens to a free zone company's 0% rate if it breaches the QFZP conditions?
The company loses QFZP status entirely, not just on the portion of income that caused the breach. The 9% rate then applies to the company’s full taxable income above AED 375,000 for the tax period in which the breach occurred, and for the following four tax periods, under Cabinet Decision No. 100 of 2023.
Are new companies exempt from corporate tax in year one, or is it small business relief instead?
There is no separate first-year exemption. A new company’s tax position in its first year is determined the same way as any other year, by the standard 0%/9% bands, or by electing Small Business Relief if its revenue and residency status qualify. Registration itself is still mandatory from incorporation regardless of expected tax liability, so a new company cannot treat its first year as automatically exempt from either registering or filing.
Running mixed mainland and free zone income and not sure what actually qualifies for 0%? Book a consultation with GCG.