The UAE introduced corporate tax to create a clear, standardized framework for how business profits are taxed. By 2026, these rules are fully active, enforced, and no longer considered new. Every business operating in the UAE, whether mainland or free zone, needs to understand how UAE corporate tax applies to them.
This blog explains how UAE corporate tax works in practical terms. It covers when the 0% rate applies, when the 9% rate applies, how the corporate tax threshold UAE works, and how taxable income is calculated. It also explains how free zones are treated under the current rules, what qualifies a business as a qualifying free zone person QFZP, and why that status matters. Finally, we walk you through basic compliance requirements such as registration and corporate tax filing UAE, without creating unnecessary concern.
Table of Contents
UAE Corporate Tax Explained in Simple Terms
UAE corporate tax is a federal tax applied to business profits earned in the UAE. It does not apply to salaries, personal income, or passive income that is not linked to a licensed business activity. The tax is calculated on net taxable profit, not total revenue.
Over 640,000 businesses have registered under the UAE’s corporate tax regime and are reporting compliance. By 2026, UAE corporate tax applies across mainland and free zone businesses under one unified framework. The difference lies in how income is treated, not whether the law applies. Every registered business must assess its position under UAE corporate tax, even if the final tax payable is 0%.
Who UAE Corporate Tax Applies To
UAE corporate tax applies to companies and individuals conducting business through a UAE trade or professional license. This includes mainland companies, free zone entities, and foreign companies with a taxable presence in the UAE.
Individuals earning employment income without a business license are outside the scope of UAE corporate tax.
How UAE Corporate Tax Is Calculated
UAE corporate tax starts with accounting profit and applies adjustments defined under the tax law. Expenses related to business activity are deducted before tax is assessed. Only taxable profit is considered, which is where the corporate tax threshold UAE becomes relevant.
UAE Corporate Tax Rates at a Glance
Taxable profit up to the threshold is taxed at 0%. Profit above that level is taxed at 9%. Certain free zone income may still qualify for 0% under UAE corporate tax free zone rules, subject to conditions.
Even when no tax is payable, registration and corporate tax filing UAE obligations still apply.
0% vs 9% Corporate Tax in the UAE: What’s the Real Difference?
The UAE corporate tax has two main rates: 0% and 9%. Understanding which applies is essential for planning and compliance.
0% Corporate Tax
0% applies to taxable profits up to the corporate tax threshold UAE. Many small businesses, start-ups, and qualifying free zone entities can fall into this category. Income that qualifies under UAE tax exemption free zone rules can also benefit from 0%, provided the business meets all conditions.
Even at 0%, businesses must register for UAE corporate tax and complete corporate tax filing UAE. Not filing can trigger penalties, regardless of whether tax is due.
9% Corporate Tax UAE
9% applies when taxable profit exceeds the threshold or when certain conditions are not met. Mainland businesses with higher profits typically fall into this category. Free zone companies can also face 9% on profit that does not qualify for 0%, especially if they earn income from mainland clients or fail QFZP requirements.
Key Differences
- Threshold: 0% only applies up to the corporate tax threshold UAE. Anything above that is taxed at 9%.
- Free Zone Treatment: Only businesses that qualify as a qualifying free zone person QFZP can maintain 0% on eligible income.
- Compliance: Both rates require registration and corporate tax filing UAE. The difference is purely in the tax amount.
Understanding which rate applies helps businesses plan cash flow, structure operations, and avoid unexpected tax liability.
Corporate Tax Threshold in the UAE: When Do You Actually Start Paying?
The corporate tax threshold UAE sets the point at which taxable profit starts being taxed. As of 2026, profits up to AED 375,000 are taxed at 0%. Only profit above this threshold is subject to the 9% corporate tax UAE rate.
How It Works
- Profit below AED 375,000: No corporate tax is due, but registration and corporate tax filing UAE are still required.
- Profit above AED 375,000: Only the portion exceeding the threshold is taxed at 9%. For example, if taxable profit is AED 500,000, the first AED 375,000 is taxed at 0%, and the remaining AED 125,000 at 9%.
- Free zone companies: Eligible UAE corporate tax free zone entities may remain at 0% on qualifying income, provided they meet QFZP conditions.
Understanding the threshold helps businesses plan and avoid surprises. Many small or newly established companies will remain under the threshold and benefit from 0%, but compliance remains mandatory.
How Taxable Income Is Calculated Under UAE Corporate Tax
Taxable income under UAE corporate tax is not the same as revenue. It starts with accounting profit and is then adjusted according to the rules set by the UAE Federal Tax Authority. Only after these adjustments is the corporate tax amount determined.
Calculating Taxable Income
1. Start with accounting profit
The process begins with the net profit reported in your financial statements for the tax year.
2. Adjust for non-deductible expenses
Some expenses cannot be deducted for tax purposes, even if they appear in accounting records. Examples include fines, penalties, and certain related-party transactions. These are added back to profit.
3. Apply allowable deductions
Certain business costs are deductible, such as operating expenses directly linked to generating taxable income. These reduce taxable profit and can lower your 9% corporate tax UAE liability.
4. Consider exempt income
Income that qualifies under UAE tax exemption free zone rules or passive income not linked to business operations is excluded from taxable income.
5. Compare against the threshold
After adjustments, the resulting taxable income is compared to the corporate tax threshold UAE. Profits below the threshold are taxed at 0%, while profits above are taxed at 9%.
Accurately calculating taxable income ensures businesses pay the correct UAE corporate tax and maintain compliance. Misclassification of expenses or revenue can trigger penalties, so understanding which items are included and which are exempt is critical.
UAE Corporate Tax Free Zones: Are They Still Tax-Free?
Free zones in the UAE were traditionally known for tax exemptions, but under the 2026 UAE corporate tax rules, not all free zone companies automatically pay 0%. Whether a free zone company benefits depends on how it operates and whether it meets specific criteria.
Free Zone Income and UAE Corporate Tax
- Free zone companies can qualify for 0% corporate tax on income that meets the conditions of a UAE corporate tax free zone.
- Income earned outside the free zone, especially from mainland clients, may be taxed at 9%.
- Eligibility requires compliance with all free zone regulations and federal tax rules.
Conditions for Free Zone Benefits
To retain 0% UAE corporate tax, a free zone company generally must:
- Operate from a recognized free zone.
- Conduct qualifying business activities.
- Comply with economic substance requirements.
- Maintain proper records demonstrating the business meets QFZP rules.
Failing any condition can lead to partial or full taxation at 9%, depending on the income source.
Key Takeaways
Even though some free zone companies can maintain 0%, registration, bookkeeping, and corporate tax filing UAE obligations still apply. Being in a free zone no longer guarantees automatic exemption. Understanding the rules and maintaining compliance ensures the company continues to benefit from the UAE corporate tax free zone incentives.
What Is a Qualifying Free Zone Person (QFZP) and Why It Matters
A qualifying free zone person (QFZP) is a specific status under UAE corporate tax that allows certain free zone companies to benefit from 0% corporate tax on qualifying income. Not all free zone entities automatically qualify, making understanding QFZP rules essential for compliance and tax planning.
Definition and Criteria
A QFZP is a company that meets all the following conditions:
- Incorporation in a recognized free zone
The company must be licensed and operate within a free zone recognized under UAE corporate tax rules.
- Qualifying activities
The company must conduct permitted business activities within the free zone, as defined by the law. Non-qualifying activities may trigger 9% corporate tax UAE.
- Revenue source
Income derived from clients outside the UAE or unrelated to free zone operations may not qualify for 0%.
- Compliance
The company must meet economic substance requirements and maintain proper records demonstrating eligibility for 0%.
Why QFZP Status Matters
- It determines whether a free zone company can retain the 0% UAE corporate tax rate.
- Companies failing QFZP requirements risk paying 9% corporate tax UAE on certain income.
- Understanding QFZP rules helps in structuring operations, managing cash flow, and avoiding unexpected tax liability.
Practical Implications
Even if a company is located in a free zone, it must actively maintain QFZP status through correct operations, proper bookkeeping, and compliance with both free zone and federal tax regulations. Without this, UAE corporate tax benefits can be lost.
Mainland vs Free Zone Corporate Tax: Practical Scenarios
Understanding how UAE corporate tax applies differently to mainland and free zone businesses is key to planning and compliance. The rules are simple once you separate location, income source, and QFZP status.
Mainland Businesses
Mainland companies are fully subject to UAE corporate tax on all taxable profits. Key points:
- Profits up to the corporate tax threshold UAE are taxed at 0%, above that 9%.
- No automatic exemptions for location; all income is generally taxable.
- Mainland businesses must register for UAE corporate tax and complete corporate tax filing UAE, regardless of profit level.
Free Zone Businesses
Free zone entities can qualify for 0% on qualifying income if they meet QFZP conditions. Key points:
- Only income linked to qualifying free zone activities is eligible for 0%.
- Revenue from mainland clients or activities outside the free zone may be taxed at 9%.
- Proper compliance and documentation are required to maintain QFZP status.
Examples
- Service Company in Mainland: Provides consulting in UAE. All profits above AED 375,000 taxed at 9%.
- Free Zone Export Company: Sells products internationally. Income qualifies for 0% if QFZP conditions are met.
- Free Zone Company Selling to Mainland Clients: Income from mainland contracts may be taxed at 9%, even if QFZP requirements are partially met.
These scenarios show that location alone does not determine tax liability; the type of income and compliance status are critical. Businesses should evaluate both factors to avoid surprises.
Corporate Tax Registration in the UAE: What You Must Do First
Every business that falls under UAE corporate tax is required to register with the Federal Tax Authority (FTA), regardless of whether it expects to pay tax. Registration is the first step toward compliance and avoiding penalties.
Who Must Register
- Mainland companies with taxable profits.
- Free zone companies, even if eligible for 0% corporate tax UAE, to maintain QFZP status.
- Foreign companies with a permanent establishment or taxable presence in the UAE.
Registration Process
- Businesses must create an account with the FTA and submit required information.
- Key details include trade license, legal entity type, and expected financial year.
- Once registered, the business receives a Tax Registration Number (TRN), which is required for all corporate tax filing UAE activities.
Key Considerations
- Registration is mandatory even if taxable profit is below the corporate tax threshold UAE.
- Free zone companies must maintain QFZP compliance during registration to qualify for 0%.
- Failure to register can result in fines, interest, or penalties, even if no tax is payable.
Completing registration early simplifies corporate tax filing UAE and ensures businesses remain compliant under both federal and free zone requirements.
Corporate Tax Filing in the UAE: Deadlines, Process, and Mistakes to Avoid
After registration, every business must complete corporate tax filing UAE, even if no tax is payable. Filing ensures compliance and confirms eligibility for 0% or 9% corporate tax UAE rates.
Filing Deadlines
- Annual corporate tax returns must be submitted within nine months of the end of the financial year.
- Late submissions can result in penalties, even if the business owes no tax.
Filing Process
- Prepare financial statements: Start with accounting profit.
- Adjust for taxable income: Include non-deductible expenses, exemptions, and deductions.
- Calculate tax payable: Apply the 0% and 9% rates based on taxable income and corporate tax threshold UAE.
- Submit return to FTA: Include supporting documents if required.
Common Mistakes
- Failing to register before filing.
- Misclassifying income between mainland and free zone operations.
- Incorrectly applying deductions or ignoring non-deductible expenses.
- Missing deadlines, even when tax payable is 0%.
Accurate corporate tax filing UAE ensures businesses avoid fines and retain benefits, especially for free zone companies maintaining QFZP status.
How to Stay Compliant With UAE Corporate Tax Without Overcomplicating Things
Staying compliant with UAE corporate tax is straightforward if you focus on the essentials: registration, bookkeeping, and timely filing. Overcomplicating the process often leads to errors and penalties.
Key Steps
- Register on time
All mainland and eligible free zone companies must register with the FTA, even if taxable profit is below the corporate tax threshold UAE.
- Keep accurate records
Maintain clear financial statements for correct taxable income calculation and corporate tax filing UAE.
- Track profit sources
Differentiate mainland income from free zone income to know whether 0% or 9% corporate tax UAE applies.
- Meet deadlines
Submit annual returns within nine months of the financial year-end to avoid fines.
- Maintain free zone status
Free zone companies must meet QFZP requirements for 0%, including proper business activity, economic substance, and record-keeping.
Focusing on these essentials makes UAE corporate tax manageable without unnecessary stress.
UAE Corporate Tax Is Manageable If You Structure It Right
UAE corporate tax is manageable when businesses understand the rules and structure operations accordingly. Profits up to the corporate tax threshold UAE are taxed at 0%, and profits above that are taxed at 9%. Free zone companies can retain 0% on qualifying income if they meet QFZP requirements. Income outside these conditions is taxed at 9%.
Compliance requires accurate tracking of taxable income, proper bookkeeping, and timely corporate tax filing UAE. Registration is mandatory for all businesses, even if no tax is payable. Distinguishing between mainland and free zone income is essential to determine which rate applies and avoid penalties.
Professional structuring ensures businesses maintain QFZP eligibility, maximize available exemptions, and handle filings correctly. GCG Structuring assists with planning, compliance, and corporate tax filing UAE, making UAE corporate tax straightforward and risk-free.
FAQ
1. 0 What is the UAE corporate tax rate?
0% up to AED 375,000; 9% above. Free zone income may stay 0% if QFZP rules are met.
2. 0 Do all free zone companies pay 0%?
No. Only QFZP companies with qualifying income. Mainland or non-qualifying income is taxed at 9%.
3. 0 Who must register?
All mainland, free zone, and foreign companies with UAE taxable presence.
4. 0 How is taxable income calculated?
Accounting profit plus non-deductible expenses minus allowed deductions, excluding exempt income.
5. 0 When is corporate tax filing UAE due?
Within nine months of year-end. Late filing incurs penalties, even if no tax is owed.
