The UAE introduced a 9% corporate tax in June 2023. For most founders who set up here precisely because of the tax advantages, the natural question is: does this change anything? For the majority of businesses, the answer is not much — but only if you understand what applies to you and what does not.
Who actually pays it
The 9% rate applies to businesses with taxable income above AED 375,000. Below that threshold, the rate is 0%. So if your business clears less than AED 375,000 in net profit in a financial year, you owe nothing.
Free zone companies get a different treatment. Qualifying free zone entities that earn what the law calls “qualifying income” — broadly, income from transactions with other free zone companies or from certain international business — continue to pay 0% on that income. The 9% only kicks in on income that falls outside those qualifying categories.
Registration is not optional even if you owe zero tax. The penalty for missing it starts at AED 10,000.
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What counts as taxable income
Corporate tax is applied to net profit, not revenue. You subtract allowable business expenses from your total income, and the tax is calculated on what remains. The UAE follows international accounting standards here, so standard deductions apply — salaries, rent, depreciation, professional fees, and so on.
When to file
Your tax return is due nine months after the end of your financial year. If your financial year runs January to December, your filing deadline is September 30 of the following year. Companies need to register for corporate tax with the Federal Tax Authority before that deadline, even if their taxable income is zero.
Registration is not the same as filing. You register once. You file annually.
What most founders get wrong
The most common mistake is assuming that a free zone license automatically means 0% tax forever. It does not. The exemption depends on your income being “qualifying” under the law, which has specific conditions. If you do business with UAE mainland clients in a way that does not qualify, that income is taxable at 9%.
The second mistake is missing the registration deadline. The FTA has been issuing penalties for late registration, starting at AED 10,000. There is no reason to pay that.
