What is Corporate Tax in Dubai and the UAE?
What is Corporate Tax in Dubai and the UAE? A Simple Guide for Business Owners
If you have a company in Dubai or another city in the UAE, have recently started a business, or are operating with a personal license, you should be familiar with "Corporate Tax".
Corporate Tax is a direct tax on the taxable profits of a business; it is not usually calculated on the total sales of the company. This law applies to financial years that started on or after June 1, 2023, and since it is a federal tax, it is valid in Dubai and throughout the UAE. Ministry of Finance of the UAE
What is the difference between Corporate Tax and VAT?
Corporate Tax and VAT are two separate taxes:
VAT is usually calculated on taxable sales and collected from the customer.
Corporate Tax is calculated on the taxable profits of the business itself.
Therefore, a company may be subject to both VAT and Corporate Tax at the same time. Additionally, registering for VAT does not mean registering for Corporate Tax, and each has separate registration and declaration requirements. Federal Tax Authority of the UAE
Which companies and individuals are subject to Corporate Tax?
Generally, the following fall under the scope of the UAE Corporate Tax law:
Companies registered in the mainland
Companies registered in free zones
Foreign companies with a branch or permanent establishment in the UAE
Certain individuals conducting business or professional activities in the UAE
Some government entities, charitable organizations, qualifying funds, and specific activities may be exempt under legal conditions; however, an ordinary business should not assume it is exempt without specialized review.
Law for Individuals and Sole Proprietors
If an individual or a Sole Establishment owner has a turnover exceeding 1 million dirhams from their business activities in the UAE during a calendar year, they generally must register for Corporate Tax.
Salaries, personal investment income, and real estate investment income that do not meet business activity criteria are not included in this threshold calculation. Official guide for individuals FTA
What is the Corporate Tax rate in the UAE?
For most ordinary companies in the UAE, the Corporate Tax rate is calculated as follows: Taxable income up to 375,000 dirhams is taxed at a rate of zero percent, and only the portion of taxable income exceeding 375,000 dirhams will be subject to a 9 percent tax.
It is very important to note that the figure of 375,000 dirhams refers to taxable profit or income, not the total sales of the company. Official government resolution of the UAE
How is Corporate Tax calculated?
The calculation of Corporate Tax usually starts from the company's accounting profit:
Company income − Acceptable expenses = Accounting profit
Then, legal adjustments are made to this profit to determine the "taxable income".
For example, expenses such as office rent, employee salaries, purchase of goods, advertising, software, and specialized services may be deductible if they are genuinely related to the business and supported by valid documentation. Personal expenses or certain non-acceptable expenses must be separated from the company's expenses.
A simple example
Assume a company has the following situation over the year:
Total income: 1,200,000 dirhams
Acceptable expenses: 700,000 dirhams
Profit before tax: 500,000 dirhams
Assuming there are no other adjustments:
Tax on the first 375,000 dirhams: zero
Remaining amount: 125,000 dirhams
Tax payable: 125,000 × 9%
Final tax: 11,250 dirhams
Thus, it is incorrect to directly multiply the total sales of 1.2 million dirhams by 9 percent.
Does a company with profits less than 375,000 dirhams need to register?
In most cases, yes. A zero tax rate does not mean zero legal responsibility.
Even if the company:
Has no income yet,
Is making a loss,
Has profits less than 375,000 dirhams,
Or has a tax payable of zero,
It may still be necessary to register for Corporate Tax and submit your declaration on time.
What is the deadline for Corporate Tax registration?
Companies based in the UAE that were established on or after March 1, 2024, generally must take action for Corporate Tax within three months from the date of establishment or company registration.
The deadline for companies registered before this date was determined based on the month of license issuance, and their main deadlines have expired in 2024. Therefore, if you have an older company and have not registered yet, it is advisable to address this matter immediately.
The penalty for late registration of Corporate Tax is usually 10,000 dirhams. Currently, the FTA has provided the possibility of waiving this penalty for some cases, provided that registration and the first declaration are completed within a special seven-month deadline; however, the conditions of each case must be reviewed separately. FTA
What is the status of Free Zone companies?
One common misconception is that all Free Zone companies are automatically exempt from corporate tax.
Free Zone companies are also subject to Corporate Tax and generally must:
Register,
Maintain accounts and financial documents,
Submit tax declarations.
A Free Zone company can benefit from a zero percent rate for "qualifying income" only if it meets all the conditions of a Qualifying Free Zone Person. Non-qualifying income may be taxed at a rate of 9 percent. Therefore, merely having a Free Zone license does not guarantee zero tax. UAE Ministry of Finance
What is Small Business Relief?
Some small businesses based in the UAE can benefit from the Small Business Relief facilities.
For eligible periods, the business income in the current period and all previous periods must not exceed 3 million dirhams. This facility is intended for tax periods that end no later than December 31, 2026.
This relief is not automatic, has specific conditions, and the company must select it in the declaration. Qualifying Free Zone Persons and members of large multinational groups cannot use it. UAE Ministry of Finance
Deadline for submitting declarations and paying tax
The Corporate Tax declaration and the amount of tax payable must be submitted and paid no later than 9 months after the end of the tax period.
For example, if the company's financial year ends on December 31, 2026, the usual deadline for submitting the declaration and paying the tax will be September 30, 2027. Federal Tax Authority of the UAE
What documents need to be retained?
The company must keep the necessary documents to prove its income, expenses, and tax calculations; including:
Sales and purchase invoices
Business contracts
Bank statements
Asset and liability lists
Payroll documents
Accounting reports
Documents related to company expenses
Documents related to Corporate Tax must generally be retained for at least seven years after the end of the tax period. FTA
Common business mistakes
Assuming that the 9 percent tax is calculated on total sales
Assuming that Free Zone companies always have zero tax
Confusing VAT registration with Corporate Tax registration
Not registering the company due to lack of profit
Mixing personal and business expenses
Not having sufficient invoices and documents for expenses
Forgetting the declaration and tax payment deadline
Withdrawing money from the company account without proper accounting records
Checklist for business owners
If you have a company in Dubai or the UAE, check these items:
Have you registered for Corporate Tax?
When does your company's financial year end?
What is the deadline for the tax return?
Is the company's accounting up to date?
Are personal and corporate accounts separate?
Do all expenses have invoices and documentation?
Does your free zone company truly qualify for the zero rate?
Are transactions with shareholders or affiliated companies properly recorded?
Summary
Corporate Tax in the UAE is a tax on the taxable profits of businesses, not on total sales. For most companies, the first 375,000 AED of taxable income is taxed at a rate of zero, and amounts above that are taxed at a rate of 9 percent.
However, even a company that has no tax payable may still be required to register, maintain records, and submit a tax return. Therefore, it is advisable to manage tax matters regularly from the start of the company's operations.
This article is supported by JBS, a company active in tax services in Dubai and the UAE.
If you have any questions or issues regarding corporate tax, VAT, tax registration, filing returns, or tax penalties, you can contact us at the following number or send a message via WhatsApp:
JBS: +971 52 513 0283
This content is for educational purposes and does not replace a specialized review of each company's tax situation. The information in the article is based on the official regulations available until July 2026.
