UAE Corporate Tax Guide for SMEs

UAE Corporate Tax is a federal tax on business profits that applies to financial years starting on or after 1 June 2023. Taxable income up to AED 375,000 is taxed at 0% and the part above at 9%. Every taxable business must register with the Federal Tax Authority (FTA), keep proper books and file a return within 9 months of its year end, even when no tax is due.

Key facts

• 0% and 9%: Corporate Tax is 0% on taxable income up to AED 375,000 and 9% on the part above (Cabinet Decision No. 116 of 2022).
• 9 months: the deadline to file the return and pay the tax after the end of each tax period (Articles 48 and 53 of the Corporate Tax Law).
• AED 1 million: the business turnover above which an individual (sole trader, freelancer) becomes subject to Corporate Tax (Cabinet Decision No. 49 of 2023).
• AED 3 million: the revenue ceiling for Small Business Relief, now available for tax periods ending on or before 31 December 2029 (Ministerial Decision No. 131 of 2026).
• 7 years: how long Corporate Tax records must be kept after the end of the tax period (Article 56).

What is Corporate Tax in the UAE?

The law has been amended three times: by Federal Decree-Law No. 60 of 2023 (the 15% top-up tax for large multinational groups), No. 40 of 2024 (withholding tax) and No. 28 of 2025 (how tax credits and incentives are used). Most of the practical detail sits in Cabinet and Ministerial decisions, which is why the Ministry publishes a consolidated version of the law with its amendments. That consolidated English text carries a reminder that it is not an official translation: the Arabic version prevails.

For an SME, the system comes down to five duties:

1. Register for Corporate Tax with the FTA and obtain a Corporate Tax registration number.
2. Keep books that support your figures, based on financial statements prepared under the accounting standards accepted in the UAE.
3. Calculate your taxable income from your accounting profit, with the adjustments the law requires.
4. File a return and pay within 9 months of the end of each tax period, through the FTA's EmaraTax portal.
5. Keep your records for 7 years.

More than 742,000 businesses and individuals were registered for Corporate Tax by 30 July 2026, according to the FTA. Corporate Tax sits alongside VAT and, from 2027, mandatory e-invoicing. They are separate obligations with separate deadlines, covered further down this page.

What is the UAE Corporate Tax rate?

The 0% band applies to every taxable person, so only the profit above AED 375,000 is taxed at 9%. Your effective rate therefore stays well below 9% for most SMEs:

The decision also warns against splitting one business into several companies to use the AED 375,000 band more than once: that is treated as an abusive arrangement under the general anti-abuse rule of the law.

Two other rates apply in specific cases:

• Qualifying Free Zone Persons: 0% on qualifying income and 9% on the rest (see the free zone section below).
• Domestic Minimum Top-up Tax: since financial years starting on or after 1 January 2025, members of multinational groups with consolidated revenue of EUR 750 million or more, in at least two of the four previous years, pay a top-up so that their effective rate reaches 15% (Federal Decree-Law No. 60 of 2023 and Cabinet Decision No. 142 of 2024). It does not concern SMEs.

UAE-source income of non-residents that is not linked to a permanent establishment is subject to a withholding tax of 0%, so in practice nothing is withheld today.

Who has to pay Corporate Tax in the UAE?

The law calls them "taxable persons". In practice:

For individuals, Cabinet Decision No. 49 of 2023 excludes wages, personal investment income and personal real estate investment income from the AED 1 million test. An individual below the threshold does not need to register.

Some persons are exempt: government entities and government-controlled entities, extractive and non-extractive natural resource businesses, qualifying public benefit entities, qualifying investment funds, public and private pension and social security funds, and some of their wholly owned subsidiaries. Funds, pension funds and subsidiaries of exempt persons must apply to the FTA to be exempt (Article 4), so check the conditions before relying on an exemption.

Do you need to register for Corporate Tax?

The Ministry of Finance states it plainly: "All Taxable Persons (including Free Zone Persons) will be required to register". Making no profit, earning less than AED 375,000 or electing Small Business Relief does not remove the duty to register. Ministerial Decision No. 43 of 2023 only excepts a few categories from registration, such as government entities, government-controlled entities, extractive and non-extractive natural resource businesses, and non-residents whose only UAE income is State-sourced income without a permanent establishment.

Registration deadlines are set by FTA Decision No. 3 of 2024:

Registering late costs AED 10,000 (Cabinet Decision No. 75 of 2023, as amended by Cabinet Decision No. 10 of 2024). The FTA waives this penalty automatically if the first Corporate Tax return is filed within 7 months of the end of the first tax period, instead of the usual 9. The waiver was announced on 7 May 2025 and the FTA has published no end date.

What is the Corporate Tax period and when do you file?

Because the law applies to tax periods starting on or after 1 June 2023, the first tax period depends on your financial year:

The same 9-month rule applies every year after that: for a calendar-year company, the return for 2025 was due by 30 September 2026, and the return for 2026 is due by 30 September 2027. The return is due even when the tax is zero. The FTA can set a different date, so check the deadline shown in your EmaraTax account.

How is UAE Corporate Tax calculated?

Article 20 of the law takes accounting income as the starting point. The main adjustments for an SME are:

• Exempt income: dividends from UAE resident companies, and qualifying dividends and gains from foreign participations, are removed.
• Entertainment: only 50% of entertainment, amusement and recreation expenses for customers, shareholders and suppliers is deductible (Article 32).
• Non-deductible items: fines and penalties, bribes, donations to entities that are not qualifying public benefit entities, dividends paid to owners, Corporate Tax itself and recoverable input VAT (Article 33).
• Interest: for larger interest amounts, net interest expense is deductible up to 30% of EBITDA (Article 30).
• Related parties: transactions with related parties must follow the arm's length principle (Article 34), and payments to connected persons, such as owners, directors and their relatives, are deductible only up to their market value (Article 36).
• Tax losses: a loss can be carried forward and offset against later taxable income, up to 75% of that income each year (Article 37).

A worked example for a trading company with a calendar financial year:

Your accounting software does most of this work if your chart of accounts separates entertainment, fines, dividends and related-party transactions from the start.

What is Small Business Relief?

The test is on revenue, not profit, and one year above AED 3 million ends the relief for every later year. Qualifying Free Zone Persons and members of large multinational groups cannot elect it. Our guide to Small Business Relief in the UAE covers the conditions, the "one bad year" trap and what changes after 2029.

How are free zone companies taxed?

The main conditions (Article 18 of the law, Cabinet Decision No. 100 of 2023 and Ministerial Decision No. 229 of 2025) are:

• Adequate substance in the free zone: people, assets and operating costs that match the activity.
• Qualifying income: income from transactions with other free zone persons (except excluded activities) and, for qualifying activities only, with mainland businesses. Qualifying activities include manufacturing and processing of goods, trading of qualifying commodities, holding of shares, logistics, distribution of goods in or from a designated zone, and headquarter or treasury services to related parties. Transactions with individuals are generally excluded activities.
• De minimis: non-qualifying revenue must not exceed 5% of total revenue or AED 5 million, whichever is lower.
• Audited financial statements for every tax period.
• Transfer pricing rules and documentation followed, and no election to be taxed at the standard rates.

A Qualifying Free Zone Person cannot use Small Business Relief. The choice between the two regimes, and whether an activity qualifies, is worth reviewing with an FTA-registered tax agent.

What records and financial statements do you need?

The 7-year period for Corporate Tax is longer than the general 5-year period of the Tax Procedures rules, so set your archiving to 7 years. Audited financial statements are required under Ministerial Decision No. 84 of 2025, which replaced Ministerial Decision No. 82 of 2023 for tax periods starting on or after 1 January 2025; the AED 50 million threshold did not change.

Good records matter even when you pay no tax: the FTA can review your return, your Small Business Relief depends on a revenue figure you must prove, and loss carry-forwards need evidence. Groups whose parent holds at least 95% of each subsidiary can also form a tax group and file one return, provided all members are UAE residents with the same financial year.

What are the penalties for Corporate Tax?

The same decision sets other penalties, for example for missing records or an incorrect return. The 2026 change to late payment penalties (Cabinet Decision No. 129 of 2025, in force since 14 April 2026) concerns VAT and excise tax, not Corporate Tax.

Most penalties are avoided with two habits: register as soon as your company is incorporated, and close your books early enough to file well before the 9-month deadline. A filed return with zero tax due costs nothing; a missing one costs AED 500 a month.

What changed in UAE Corporate Tax in 2025 and 2026?

We summarise each new decision in our UAE e-invoicing and tax news, with a link to the official text.

How does Corporate Tax relate to VAT and e-invoicing?

The three share the same raw material: your invoices and your books. An e-invoice carries structured data that feeds your VAT return, and the same accounting entries build the profit on which Corporate Tax is calculated. Small Business Relief or a 0% Corporate Tax result does not exempt you from e-invoicing.

• Our UAE e-invoicing guide explains the system and the e-invoicing deadlines by revenue band.
• The e-invoicing readiness check gives you your phase and your next three actions in two minutes.

Which accounting software keeps you ready for Corporate Tax?

What to look for:

• A UAE chart of accounts that separates the items you adjust for Corporate Tax: entertainment, fines, dividends, related-party transactions.
• A Corporate Tax report or a clear path from your profit and loss account to your taxable income.
• Seven-year archiving of invoices, journals and supporting documents.
• A connection to an accredited e-invoicing provider before your 2027 deadline.

Our comparison of the best accounting software in the UAE sets out which products cover VAT, Corporate Tax and e-invoicing, from simple cloud tools to ERPs. If you are choosing now, the software finder ranks three options for your profile in about a minute.

• Small Business Relief →Who can elect Small Business Relief until 2029, the AED 3 million trap, and the duties that remain: registration, filing, books and e-invoicing.
• Best accounting software →Eight accounting tools compared on UAE criteria (VAT, Corporate Tax, e-invoicing ASP status, Arabic, WPS payroll), with AED cost examples and our pick by profile.
• UAE e-invoicing guide →The complete guide to mandatory e-invoicing in the UAE: scope, deadlines, penalties, ASPs, software and a 10-step plan.
• Readiness check →9 questions, 2 minutes: your phase, your deadlines, a score out of 100 and your 3 priority actions.