UAE corporate tax is 0% on the first AED 375,000 of a company's taxable income and 9% on everything above it. A free zone company pays 0% on qualifying income only if it is a Qualifying Free Zone Person, and small businesses with revenue up to AED 3 million can elect Small Business Relief and be treated as having no taxable income until tax periods ending 31 December 2029.
Your bucket depends on what the company does, who it sells to and group size. The rules below come from Federal Decree-Law No. 47 of 2022 and the Cabinet, Ministerial and Federal Tax Authority (FTA) decisions issued under it, all checked on 15 October 2026.
UAE corporate tax rate: 0% up to AED 375,000, 9% above
The law applies to tax periods starting on or after 1 June 2023, so calendar-year companies were first taxed on 2024. Article 3 sets two rates, and Cabinet Decision No. 116 of 2022 fixes the dividing line at AED 375,000:
- 0% on the portion of taxable income up to AED 375,000.
- 9% on the portion above AED 375,000.
It's an allowance, not a cliff. A mainland company with AED 1,000,000 of taxable income pays 9% on AED 625,000, which is AED 56,250. Splitting one business into several companies to collect extra bands is treated as tax avoidance under the law's anti-abuse rule.
Taxable income is accounting profit after the law's adjustments, such as the participation exemption for qualifying dividends and capital gains (Article 23). It is not revenue.
Who pays 9% and who pays 0%
| Type of business | Rate on profit | What decides it |
|---|---|---|
| Mainland (onshore) company | 0% up to AED 375,000, 9% above | Standard rates under Article 3(1) |
| Resident business with revenue up to AED 3 million that elects Small Business Relief | Treated as having no taxable income | Revenue at or below AED 3 million in this and every earlier period |
| Qualifying Free Zone Person, qualifying income | 0% | All QFZP conditions met for the whole tax period |
| Qualifying Free Zone Person, non-qualifying income within de minimis | 9% on that income | Non-qualifying revenue stays at or below 5% of total revenue or AED 5 million, whichever is lower |
| Free zone company that fails a QFZP condition | 0% up to AED 375,000, 9% above, on all income | Loses QFZP status for that period and the next four |
| Group with consolidated revenue of EUR 750 million or more | 9% plus a top-up to a 15% effective rate | Domestic Minimum Top-up Tax, from financial years starting 1 January 2025 |
Small Business Relief in the UAE: revenue under AED 3 million
Small Business Relief is in Article 21 of the law. A resident taxable person can elect to be treated as having derived no taxable income for a tax period if its revenue for that period and all previous tax periods stays at or below AED 3,000,000. The threshold comes from Ministerial Decision No. 73 of 2023, and the FTA's Small Business Relief page sets out the test and the exclusions.
The end date moved this summer. The relief was originally limited to tax periods ending on or before 31 December 2026. Ministerial Decision No. 131 of 2026, issued on 29 July 2026 and announced by the Ministry of Finance on 7 August 2026, extends it to tax periods ending on or before 31 December 2029. The AED 3 million threshold didn't change.
Points people miss:
- The test looks backwards. Cross AED 3 million once and the relief is gone for later periods too.
- You still register and file. The election is made on the return for each tax period.
- Qualifying Free Zone Persons can't use it, and neither can members of multinational groups with consolidated revenue above AED 3.15 billion.
- A loss made in a relief year can't be carried forward.
Qualifying Free Zone Person: when the 0% rate applies
A free zone licence alone gets you nothing. Under Article 18, a free zone company is a Qualifying Free Zone Person (QFZP) only if it meets every condition:
- It maintains adequate substance in the UAE.
- It derives qualifying income.
- It hasn't elected to be taxed at the standard rates.
- It complies with the arm's length rules and transfer pricing documentation (Articles 34 and 55).
- Its non-qualifying revenue stays within the de minimis limit.
- It prepares audited financial statements.
The last two come from Ministerial Decision No. 229 of 2025, which replaced Ministerial Decision No. 265 of 2023. Fail any condition at any point in a tax period and the company stops being a QFZP from the start of that period and for the following four. One bad year means five at standard rates.
What counts as qualifying income
Cabinet Decision No. 100 of 2023 lists the main categories:
- Income from transactions with another Free Zone Person, unless it comes from an excluded activity.
- Income from transactions with a Non-Free Zone Person, but only from qualifying activities that aren't excluded.
- Certain income from qualifying intellectual property.
This is where many free zone plans go wrong. "Non-Free Zone Person" covers your customers abroad as well as customers on the UAE mainland. A free zone consultancy billing a client in Prague or Munich earns qualifying income only if the service is a qualifying activity. General consulting, marketing and software development services aren't on the list.
The qualifying activities in Ministerial Decision No. 229 of 2025 are: manufacturing and processing goods, trading qualifying commodities (quoted metals, minerals, energy, agricultural and environmental commodities), holding shares for investment, shipping, reinsurance, fund management, wealth and investment management, headquarter and treasury services to related parties, aircraft financing and leasing, distribution in or from a Designated Zone, logistics, and ancillary activities. Most transactions with natural persons, banking and most insurance and finance are excluded.
The de minimis rule
A QFZP can earn some non-qualifying revenue without losing its status. The limit is 5% of total revenue or AED 5,000,000, whichever is lower (Article 3 of Ministerial Decision No. 229 of 2025). At AED 20 million of revenue the limit is AED 1 million; at AED 200 million it's capped at AED 5 million. Non-qualifying income inside the limit is taxed at 9%; go over it and you lose QFZP status entirely.
Substance
Adequate substance means the company carries out its core income-generating activities in the free zone, with adequate assets, full-time employees and operating expenditure there. Outsourcing to a third party in the free zone is possible only with adequate supervision. The FTA's Free Zone Persons guide explains how it's assessed, and we cover what holds up in practice in UAE free zone substance: what counts as real presence. A flexi-desk with a director who lives in Europe is unlikely to pass.
UAE corporate tax registration, filing deadlines and penalties
Every taxable person registers, including free zone companies and Small Business Relief claimants. Under FTA Decision No. 3 of 2024, in force since 1 March 2024:
- A company incorporated in the UAE, including a free zone company, applies within 3 months of incorporation.
- A foreign company effectively managed and controlled in the UAE applies within 3 months of the end of its financial year.
The return and payment are due within 9 months of the end of the tax period (Article 53), so 30 September for a calendar year. The FTA reminded taxpayers on 2 September 2026 that 2025 returns were due by 30 September 2026. Returns for calendar 2026 are due by 30 September 2027.
Penalties come from Cabinet Decision No. 75 of 2023, as amended by Cabinet Decision No. 10 of 2024:
| Violation | Penalty (AED) |
|---|---|
| Late registration | 10,000 |
| Late tax return | 500 a month for the first 12 months, then 1,000 a month |
| Late payment | 14% a year on the unpaid tax, charged monthly |
| Failure to keep required records | 10,000, or 20,000 for a repeat within 24 months |
In May 2025 the FTA announced a waiver of the late registration penalty for taxpayers who file their first return or annual declaration within 7 months of the end of their first tax period. Confirm with the FTA that it still applies to your period.
Pillar Two: the 15% Domestic Minimum Top-up Tax for large groups
Large multinationals don't get 9%. Cabinet Decision No. 142 of 2024 introduced a Domestic Minimum Top-up Tax (DMTT) for financial years starting on or after 1 January 2025. It applies to UAE entities of groups with consolidated revenue of EUR 750 million or more in at least two of the four preceding financial years, and tops up their effective rate in the UAE to the 15% minimum rate, in line with the OECD Pillar Two rules.
Registration deadlines are in FTA Decision No. 12 of 2026: 7 months from the end of the first in-scope financial year, and on or before 30 November 2026 for entities whose financial year ended before 30 April 2026.
What this means for an EU founder
The UAE rate is half the calculation. The other half is whether your home country still taxes you or the company.
- Where the company is managed. If decisions are made from your desk in Europe, your home country may treat the UAE company as resident there or as having a permanent establishment. See permanent establishment risk when running European clients from a UAE company.
- Where you live. Dividends paid to an EU tax resident are usually taxed in the EU. Personal residency is covered on our UAE tax residency page.
- Controlled foreign company rules. EU states apply CFC rules under the Anti-Tax Avoidance Directive, and a company paying 0% or 9% often counts as low-taxed, so its profit may be taxed in your hands.
- Leaving. Moving yourself or your shares out of an EU country can trigger exit tax before the UAE side even starts.
In practice, a European service business in Dubai usually pays 0% on the first AED 375,000 and 9% above, free zone or mainland. The full 0% fits holding, commodity trading, logistics, manufacturing and group headquarter functions run by people actually in the UAE.
Common questions
What is the UAE corporate tax rate in 2026?
It's 0% on the first AED 375,000 of taxable income and 9% on the rest. Qualifying Free Zone Persons pay 0% on qualifying income and 9% on other taxable income. Groups with consolidated revenue of EUR 750 million or more also pay a top-up tax to reach a 15% effective rate.
Do free zone companies pay corporate tax in the UAE?
All free zone companies must register and file. Only those meeting every Qualifying Free Zone Person condition pay 0%, and only on qualifying income. The rest pay the same rates as a mainland company.
Has Small Business Relief been extended beyond 2026?
Yes. Ministerial Decision No. 131 of 2026, issued on 29 July 2026, extends Small Business Relief to tax periods ending on or before 31 December 2029. The revenue threshold is still AED 3 million, measured for the current and all previous tax periods.
When is the UAE corporate tax return due?
Within 9 months of the end of the tax period, and the tax is payable by the same date. For a financial year ending 31 December 2026, the deadline is 30 September 2027. Filing late costs AED 500 a month for the first year, then AED 1,000 a month.
Can a free zone consultancy with clients in Europe pay 0%?
Usually not. Income from customers outside the free zones qualifies only if it comes from a qualifying activity, and general consulting isn't one. Above the de minimis limit, the company loses QFZP status and pays 9% on profit above AED 375,000.
To see how these rules apply to your setup, start with the free assessment.
Sources
- Federal Decree-Law No. 47 of 2022 and its amendments, Ministry of Finance consolidated text, checked 15 Oct 2026
- Cabinet Decision No. 116 of 2022 on the taxable income threshold, Ministry of Finance, checked 15 Oct 2026
- Small Business Relief, Federal Tax Authority, checked 15 Oct 2026
- Ministerial Decision No. 131 of 2026, issued 29 July 2026, checked 15 Oct 2026
- Ministry of Finance announces extension of Small Business Relief until 31 December 2029, 7 August 2026
- Cabinet Decision No. 100 of 2023 on Qualifying Income, issued 25 October 2023, checked 15 Oct 2026
- Ministerial Decision No. 229 of 2025 on Qualifying Activities and Excluded Activities, issued 28 August 2025, checked 15 Oct 2026
- Free Zone Persons Corporate Tax Guide, Federal Tax Authority, May 2024, checked 15 Oct 2026
- FTA Decision No. 3 of 2024 on registration timelines, effective 1 March 2024, checked 15 Oct 2026
- Cabinet Decision No. 75 of 2023 and its amendments on administrative penalties, checked 15 Oct 2026
- FTA reminder on filing and payment deadlines, 2 September 2026
- FTA to waive penalty for late corporate tax registration, 7 May 2025
- Cabinet Decision No. 142 of 2024 on Top-up Tax on Multinational Enterprises, issued 31 December 2024, checked 15 Oct 2026
- FTA Decision No. 12 of 2026 on Top-up Tax registration and deregistration, issued 16 July 2026, checked 15 Oct 2026