UAE Corporate Tax Guide 2025: What Every Business Owner Needs to Know
A practical guide to the UAE corporate tax introduced in 2023: rates, exemptions, free zone rules, registration deadlines, and planning strategies.
The UAE corporate tax came into effect for financial years starting 1 June 2023, ending the country’s longtime reputation as a completely tax-free jurisdiction. However, with a 9% standard rate and a generous exemption threshold, the UAE remains one of the world’s most tax-efficient destinations for businesses.
The Key Numbers
- 0% — on profits up to AED 375,000 (~USD 102,000) per year
- 9% — on profits above AED 375,000
- 15% — applicable only to large multinationals under OECD Pillar Two rules (global revenue > EUR 750M)
For most SMEs and startups, this means paying zero corporate tax for the first few years of growth.
Who Is Affected?
All UAE-registered entities are subject to corporate tax, including:
- Mainland companies (LLCs, sole establishments, branches of foreign companies)
- Free Zone companies — must register, but may qualify for 0% rate
- Foreign companies with a permanent establishment (PE) in the UAE
Even if your company pays 0% tax, registration with the FTA is mandatory.
Free Zones: The 0% Opportunity
Free zone companies can maintain 0% corporate tax on qualifying income if they achieve Qualifying Free Zone Person (QFZP) status.
What qualifies:
- Services provided to foreign clients
- Cross-border trade in goods
- Transactions between free zone entities
- Holding of qualifying intellectual property
What doesn’t qualify (taxed at 9%):
- Direct sales to UAE mainland customers
- Certain passive income streams
The substance requirement: To qualify, your free zone company must have genuine operations — a real office, employees, and management decisions made in the UAE. Shell companies with no actual activity risk losing QFZP status.
Registration Deadlines
| Company Type | Fiscal Year Starts | First Tax Return Due |
|---|---|---|
| Financial year = calendar year | 1 Jan 2024 | 30 Sep 2025 |
| Financial year starts June | 1 Jun 2023 | 28 Feb 2025 |
Registration is done via the EmaraTax portal (emaraTax.ae). Late registration attracts a penalty of AED 10,000.
Tax Planning Strategies
1. Maximise the 0% Free Zone Window
If your clients are primarily outside the UAE, a well-structured free zone company can keep tax at 0% indefinitely — provided you maintain adequate substance.
2. Use the AED 375,000 Threshold
Small businesses and sole founders can plan cash distributions and profit recognition to stay below the threshold and pay 0%.
3. Participation Exemption
Dividends received by a UAE holding company from qualifying subsidiaries are exempt from corporate tax. This is ideal for group structures.
4. Transfer Pricing Compliance
If you have related-party transactions (e.g., paying fees to your offshore entity or to yourself), document them properly at arm’s length — the FTA scrutinises these.
Accounting and Record-Keeping
- Financial records must be kept for 7 years
- Free Zone QFZPs must prepare audited financial statements
- Mainland companies should consider audited accounts even if not legally required (banks and partners increasingly request them)
Common Mistakes to Avoid
❌ Not registering with FTA — even at 0% tax, registration is compulsory
❌ Assuming all free zone income is 0% — mainland sales are taxed at 9%
❌ Ignoring related-party documentation — transfer pricing rules are strict
❌ Mixing personal and company expenses — complicates deduction claims
❌ Waiting until the last minute — EmaraTax can be slow during peak periods
Bottom Line
The UAE corporate tax is business-friendly by global standards. With proper planning and structure, most SMEs will pay 0% or very little. The key is to register on time, maintain substance, and document everything.
Need help with corporate tax registration or optimising your structure? Contact our tax team.