The UAE's 9% Corporate Tax and the AED 375,000 Threshold, Explained
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The structure is a two-band system: 0% on the first AED 375,000 of taxable income, 9% on everything above, applying to financial years starting on or after 1 June 2023 under Federal Decree-Law 47 of 2022.
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The threshold applies to taxable income (profit after adjustments), not revenue, and it is a permanent feature of the law, unlike the temporary AED 3 million Small Business Relief that expires with 2026.
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Scope is wide: UAE companies, foreign companies with a UAE presence, free zone entities (which must register and file even at 0%), and individuals whose business turnover exceeds AED 1 million.
The UAE's corporate tax is genuinely simple by global standards, and most confusion comes from mixing up its three different thresholds. Here is the whole system in one place.
The rate bands
| Taxable income | Rate |
|---|---|
| Up to AED 375,000 | 0% |
| Above AED 375,000 | 9% |
The 0% band works like a tax-free allowance, not a cliff: a business with AED 500,000 of taxable income pays 9% on AED 125,000 (AED 11,250), not on the whole amount. A separate regime, the 15% Domestic Minimum Top-up Tax, applies only to members of multinational groups with consolidated revenue of EUR 750 million or more; it is irrelevant to SMEs.
The three thresholds people conflate
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AED 375,000 of taxable income: the permanent 0% band above.
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AED 1 million of turnover: the line at which individuals (freelancers, sole proprietors) enter the corporate tax system at all, covered in do freelancers pay corporate tax?
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AED 3 million of revenue: the ceiling for electing Small Business Relief, the temporary regime that treats qualifying businesses as having zero taxable income for periods ending on or before 31 December 2029; details and the countdown in Small Business Relief, and a two-minute eligibility check in the Small Business Relief Checker.
What "taxable income" means
The starting point is accounting net profit under acceptable standards (IFRS; smaller businesses may use cash-basis accounting below revenue thresholds), then adjusted: most genuine business expenses are deductible; entertainment is 50% deductible; fines, and certain related-party excesses are not; interest deductions face limits; and exempt income (notably qualifying domestic and foreign dividends and participation gains) comes out. Salaries, including reasonable owner salaries in juridical persons, are deductible costs, which makes the profit line, not the revenue line, the tax base.
Who is in scope
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UAE-incorporated companies (mainland and free zone), on worldwide income.
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Free zone companies: in scope and obliged to register and file, with a 0% rate available only on qualifying income for entities meeting the Qualifying Free Zone Person conditions (substance, de minimis limits on non-qualifying revenue, audited accounts). QFZP status is tested yearly, and failing it means 9% on everything for five years.
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Foreign companies with a permanent establishment or UAE-sourced income.
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Natural persons above the AED 1 million turnover line.
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Exempt by design: government entities, qualifying public benefit entities, pension funds, and extractive businesses under emirate-level regimes. Employment income, personal investments, and personally held real estate income are outside the system entirely.
The compliance skeleton
Registration on EmaraTax is mandatory for everyone in scope, regardless of whether any tax will be due, including SBR electors and 0% free zone entities (the registration walkthrough). The return and any payment are due within nine months of the tax period's end: a 31 December 2025 year-end files by 30 September 2026. Records are kept seven years, and audited financials are required for revenue of AED 50 million+ and for all QFZPs. The costs of getting any of this wrong are itemised in penalties and deadlines.
And it is not VAT
Corporate tax is annual, on profit. VAT is transactional, at 5%, with its own AED 375,000 registration threshold measured on supplies, its own TRN, and its own returns; the coincidence of the two 375,000 figures causes endless confusion, untangled in VAT for individuals and small businesses.
The planning takeaway
For SMEs the sequence through 2026 is: confirm registration, elect SBR if eligible (it is a checkbox worth real money), and use the remaining window to build the bookkeeping that the standard regime will demand from 2027. The 9% is among the world's lowest corporate rates; the penalties for treating it casually are not.
Sources and References
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Federal Decree-Law No. 47 of 2022 on the Taxation of Corporations and Businesses (mof.gov.ae)
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Cabinet Decision No. 49 of 2023; Ministerial Decision No. 73 of 2023; Ministerial Decision No. 84 of 2025 (audited financial statements)
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FTA, corporate tax guides and returns guidance (tax.gov.ae)
This article is general information, not tax advice. Consult a registered tax agent for your specific situation.
Published on 9 September 2026.