Corporate Tax Laws in UAE (2025–2026 Guide): Who Must Register, and How Tax Is Calculated

UAE corporate tax laws are now a core part of doing business in the Emirates—whether you’re a mainland company, a free zone entity, or a foreign business earning UAE-linked income. The regime applies from financial years starting on or after 1 June 2023, with a clear rate structure and a growing set of compliance expectations around records, filings, transfer pricing, and registration deadlines. 

At Young & Right, we help businesses understand what the law means in practice—so you can register correctly, structure confidently, file on time, and reduce the risk of penalties.

Core tax framework: what the corporate tax laws in UAE actually say

The UAE Corporate Tax (CT) start date

The corporate tax system applies for financial years starting on or after 1 June 2023. That means your “first tax period” depends on your financial year-end (for example, a business with a year ending 31 December started its first CT period on 1 January 2024). 

Corporate tax rates in the UAE

For most businesses, the corporate tax rates follow a two-tier structure:

• 0% on taxable income up to AED 375,000

• 9% on taxable income above AED 375,000 (per tax period) 

This design supports SMEs while still aligning the UAE with international tax standards.

Who is subject to corporate tax? (Taxpayer types and scope)

Corporate tax laws in UAE focus on who you are (resident vs non-resident), how you operate, and where your income is connected.

A) Resident Persons (UAE-based taxpayers)

A “Resident Person” generally includes:

• Juridical persons (companies and other legal entities) incorporated in the UAE (mainland or free zone), and certain foreign entities that are effectively managed and controlled in the UAE. 

• Natural persons (individuals) only when they conduct a business/business activity in the UAE and exceed a turnover threshold (explained below). 

B) Natural persons: when individuals become taxable

Not every individual needs corporate tax registration. Under the FTA’s published guidance, a natural person becomes subject to corporate tax if they conduct a business/business activity and their annual turnover exceeds AED 1,000,000. If turnover crosses the threshold, registration and filing obligations follow. 

(Importantly, the rules distinguish business income from categories like salary/wages and personal investment activity—your facts matter, and this is where correct classification becomes critical.) 

C) Non-Resident Persons: when foreign businesses are taxed in the UAE

Non-residents can be taxed when they have a UAE connection through:

• a Permanent Establishment (PE) (e.g., fixed place of business or dependent agent activity),

• UAE-sourced income, or

• a UAE nexus (as defined under relevant decisions). 

In practical terms: a foreign company can become taxable without incorporating a UAE company if its UAE business footprint triggers a PE or it earns certain UAE-linked income.

Permanent Establishment (PE), UAE-sourced income, and “nexus”: the triggers that create tax exposure
 

Permanent Establishment (PE)

A PE commonly arises when a non-resident has a fixed place of business in the UAE (such as an office, branch, or similar presence) or operates through a dependent agent who plays a key role in concluding contracts in the UAE. These are classic PE risk areas—especially for foreign groups with sales teams, project offices, or contracted representatives. 

UAE-sourced income

UAE corporate tax guidance recognizes UAE-linked income categories (for example, UAE-connected services, property-related income, and specific cross-border income streams). What matters is not only where the customer is, but also where the activity is performed and how contracts and risks are structured. 

UAE nexus

“Nexus” is essentially a legal concept that connects a person to the UAE for corporate tax purposes. It becomes relevant for some non-resident structures, including modern operating models where value is created in-market without a traditional fixed office. 

Free zone positioning: Qualifying Free Zone Person (QFZP) and the 0% benefit

Free zone companies are not automatically “tax-free.” Free zone juridical persons are within the corporate tax scope as taxable persons, but they may benefit from a special regime if they qualify.

What is a Qualifying Free Zone Person (QFZP)?

A Qualifying Free Zone Person can benefit from:

• 0% corporate tax on qualifying income

• 9% corporate tax on non-qualifying income 

Key conditions you must meet (the “make-or-break” points)

To be treated as a QFZP, a free zone entity must meet conditions that typically include:

• maintaining adequate substance,

• earning qualifying income (and meeting any de minimis requirements),

• not electing into the standard corporate tax regime, and

• meeting compliance obligations (including record-keeping and transfer pricing expectations). 

Practical note: The fastest way to lose the 0% benefit is to assume it applies automatically, then discover late that your income is “non-qualifying” or substance and documentation are not in place.

Reliefs, exemptions, and special regimes you should know

A) Small Business Relief (SBR) – major opportunity for SMEs

If your business qualifies, Small Business Relief can treat you as having no taxable income for the relevant period—effectively reducing CT to zero for that period.

Key points from the FTA:

• You can be eligible where revenue is ≤ AED 3,000,000

• The relief is available for tax periods ending on or before 31 December 2026 (subject to conditions and elections). 

This is one of the most valuable SME reliefs in the current corporate tax framework—but eligibility depends on meeting the criteria and making the correct election.

B) Exempt Persons (who can be outside the tax net)

UAE CT law and guidance recognize exempt categories (subject to conditions and, for some categories, formal recognition/approval). These can include:

• Government entities and government-controlled entities

• Extractive and non-extractive natural resource businesses (with notification requirements)

• Qualifying public benefit entities

• Certain pension/social security funds and qualifying investment funds (often with approval conditions) 

If you believe you’re exempt, don’t assume—confirm your category and whether registration/annual declaration requirements apply.

C) Domestic Minimum Top-up Tax (DMTT) – 15% minimum tax for large MNEs

From 1 January 2025, the UAE introduced the Domestic Minimum Top-up Tax (DMTT) to align with global minimum tax rules.

Key attributes:

• 15% minimum effective tax

•  Applies to MNE groups with €750 million+ consolidated global revenue in at least 2 of the prior 4 financial years

•  Designed to align with the OECD Pillar Two / Two-Pillar Solution 

For in-scope groups, this changes the conversation from “what is the UAE headline rate?” to “what is our effective tax rate under Pillar Two mechanics?”

How taxable income is calculated (and why accounting quality matters)

Start with accounting profit; then apply tax adjustments

UAE corporate tax generally begins with accounting income/profit from your financial statements, then applies a set of tax adjustments to reach taxable income. 

This is why bookkeeping and financial reporting discipline are no longer “nice to have.” They’re the foundation of corporate tax accuracy.

Common adjustment areas that create risk in real life

While the detailed rules depend on your facts, areas that frequently cause issues include:

• entertainment and non-deductible expenses,

• expenses linked to exempt income,

• interest limitation rules, and

• documentation gaps that make legitimate deductions hard to defend. 

At Young & Right, this is where we focus heavily: strong working papers, consistent ledgers, and a tax computation that can survive an FTA review.

Group relief and tax loss rules (planning tools—when used correctly)

A) Qualifying Group Relief

The UAE provides mechanisms for relief within groups, including rules for transfers within a qualifying group and related consequences (“clawback” concepts). Proper structuring and documentation are essential because group relief isn’t automatic—you must meet the qualifying conditions and follow the required tax treatment. 

B) Tax losses: carry-forward and utilisation limits

The guidance includes the ability to carry forward tax losses and use them against future taxable income, subject to conditions and limitations. In practice, you must track losses carefully and ensure they are calculated and utilised in line with the law and implementing guidance. 

Transfer Pricing (TP): arm’s length isn’t optional

The arm’s length principle

Related-party transactions must be priced as if they were between independent parties (OECD-aligned). This affects intercompany management fees, service charges, royalties, financing, commission models, and cost allocations. 

Documentation and thresholds (Master File / Local File)

Ministerial Decision guidance sets conditions for maintaining a Master File and Local File when thresholds are met. The commonly referenced triggers include:

• where UAE revenue exceeds AED 200 million, and/or

• where the person is part of an MNE group meeting the relevant group threshold. 

APA (Advance Pricing Agreements)

The UAE has also advanced its TP ecosystem through an APA framework, providing a route (for eligible cases) to agree TP positions with more certainty. 

Compliance essentials: registration, filing, payment, records, and penalties

A) Corporate tax registration (and EmaraTax)

Registration is done through the FTA’s channels (EmaraTax is the key platform for filing and compliance processes). 

Timelines can vary by category (for example, different rules for juridical persons based on licensing timelines, and specific timing for natural persons once turnover exceeds the threshold). 

B) Filing and payment deadline: 9 months

A taxable person must generally:

• submit the CT return, and

• pay corporate tax due
within 9 months from the end of the relevant tax period. 

C) Penalties: the AED 10,000 late registration penalty (and how waiver initiatives work)

Corporate tax includes administrative penalties, including a AED 10,000 late registration penalty in relevant scenarios. 

The FTA has also published penalty waiver initiatives tied to meeting certain conditions (for example, filing within specified timeframes) to support compliance transitions. 

The takeaway: penalties are avoidable—if you register on time, file correctly, and maintain the right supporting documents.

Entities & attributes (SEO-ready map you can use in your content brief)

Here are the key entities and their attributes tied to “corporate tax laws in UAE”:

• UAE Corporate Tax (CT): effective from 1 June 2023; applies based on residence/PE/UAE-sourced income; computed from accounting profit with adjustments. 

• Federal Tax Authority (FTA): registration, filing, payment, penalties, guidance notes, and compliance publications. 

• Ministry of Finance (MoF): policy announcements, CT framework overview, DMTT policy and scope. 

• Resident Person: UAE incorporated/effectively managed entities; natural persons meeting business turnover threshold. 

• Non-Resident Person: taxed via PE, UAE-sourced income, or nexus. 

• Natural Person (CT scope): becomes taxable when business turnover exceeds AED 1 million; specific registration timing. 

• Corporate tax rates: 0% up to AED 375,000; 9% above. 

• Qualifying Free Zone Person (QFZP): 0% on qualifying income; 9% on non-qualifying; must meet substance/conditions. 

• Small Business Relief: revenue ≤ AED 3m; available for periods ending on/before 31 Dec 2026 (subject to election/conditions). 

• DMTT (15%): effective 1 Jan 2025; applies to qualifying MNEs with €750m+ revenue threshold. 

• Transfer Pricing: arm’s length; documentation requirements under ministerial decision; TP guide supports compliance. 

• CT returns & deadlines: file and pay within 9 months; filed online (EmaraTax). 

• Late registration penalty: AED 10,000; waiver initiatives may apply if conditions are met. 

How Young & Right supports corporate tax compliance (practical, not theoretical)

Corporate tax compliance is not just “register and file.” The businesses that stay safe are the ones that can explain their numbers clearly—because the FTA expects consistency between ledgers, financial statements, tax computations, and supporting documents.

Young & Right typically supports businesses with:

• Corporate tax impact assessment (resident/non-resident, PE risk, free zone positioning)

• Registration support and deadline tracking (including natural person cases)

• IFRS-aligned books cleanup and audit-ready working papers for CT

• Tax computation preparation with defensible adjustments

• Free zone support: QFZP review, qualifying income logic, substance alignment

• Transfer pricing: related-party mapping, policy support, and documentation readiness

• CT return filing support and post-filing assistance (queries, clarifications, voluntary disclosures where needed)

Conclusion: get corporate tax right before it becomes expensive

Corporate tax laws in UAE are straightforward on the surface—rates, thresholds, and deadlines—but compliance risk usually comes from the details: resident vs non-resident interpretation, free zone qualifying rules, correct classification of income, and transfer pricing documentation.

If you want a clean, defensible corporate tax position—registration done correctly, financials aligned, and filings submitted confidently—Young & Right can support you end-to-end.