ae-corporate-tax

Files (1)

• SKILL.md

SKILL.md (first lines)

# UAE Corporate Tax: 2026 rates, scope, Small Business Relief, free zones and filing

Tax year 2026. In the UAE the tax period is the business's financial year, so "2026" here means tax periods running in 2026 (for most businesses, the calendar year 1 January to 31 December 2026). The rules below are the law as published on tax.gov.ae and mof.gov.ae on 25 September 2026. A short dated section covers returns for periods ending in 2025, which are being filed now.

## Scope and who this is for ([Corporate Tax Law, consolidated](https://mof.gov.ae/wp-content/uploads/2026/01/Federal-Decree-Law-No.-47-of-2022-and-its-amendments-en-v13.1.26.pdf); [Cabinet Decision No. 49 of 2023](https://tax.gov.ae/DataFolder/Files/Legislation/05-06-2023/3/Cabinet%20Decision%20No.%2049%20of%202023%20-%20for%20publishing.pdf))

This skill covers federal Corporate Tax under Federal Decree-Law No. 47 of 2022 for:

- UAE companies and other juridical persons, including free zone companies, and foreign companies effectively managed and controlled in the UAE. These are taxable from the first dirham of taxable income. There is no turnover threshold for a juridical person (Corporate Tax Law, Article 11(3)).
- Individuals (natural persons) running a business in the UAE: sole establishments, freelancers and other self-employed people. They are taxable only when their total business turnover is more than AED 1,000,000 in a calendar year (Cabinet Decision No. 49 of 2023, Article 2).
- Small businesses deciding whether to elect Small Business Relief.
- A summary of the domestic minimum top-up tax for large multinational groups. The detailed work is referred out.

There is no UAE tax on an individual's wages. Wages, personal investment income and real estate investment income are not business income for an individual, whatever the amount, and do not count towards the AED 1,000,000 test (Cabinet Decision No. 49 of 2023, Article 2(2)).

The skill does not cover VAT, excise tax, Emirate-level taxes, tax groups, business restructuring relief, or the detailed top-up tax computation.

## Ask the client first

- **What kind of person is the business?** A company (LLC, free zone company, branch), a sole establishment or freelancer (natural person), or a partnership? A juridical person is in scope from the first dirham; a natural person only above AED 1,000,000 of business turnover in a calendar year. ([Cabinet Decision No. 49 of 2023](https://tax.gov.ae/DataFolder/Files/Legislation/05-06-2023/3/Cabinet%20Decision%20No.%2049%20of%202023%20-%20for%20publishing.pdf))
- **Financial year end and first tax period.** This sets the return and payment deadline (9 months after the period ends).
- **Revenue for this period and for every earlier tax period.** Small Business Relief fails permanently once any period's revenue has been over AED 3,000,000. ([Ministerial Decision No. 73 of 2023](https://tax.gov.ae/Datafolder/Files/Legislation/Corporate%20Tax/Ministerial%20Decision%20No.%2073%20of%202023%20-%20for%20publishing.pdf))
- **Is the business part of a multinational group?** Ask for group consolidated revenue. A constituent company of a multinational group, as defined in Cabinet Decision No. 44 of 2020 (groups with consolidated revenue of at least AED 3.15 billion), cannot use Small Business Relief ([Ministerial Decision No. 73 of 2023, Article 3](https://tax.gov.ae/Datafolder/Files/Legislation/Corporate%20Tax/Ministerial%20Decision%20No.%2073%20of%202023%20-%20for%20publishing.pdf); [Small Business Relief Guide](https://tax.gov.ae/Datafolder/Files/Guides/CT/Small%20Business%20Relief%20Guide%20-%20EN%20-%2029%2008%202023.pdf)). Groups with EUR 750 million or more may be in scope of top-up tax. ([Cabinet Decision No. 142 of 2024](https://tax.gov.ae/Datafolder/Files/Legislation/Cabinet-Decision-No-142-of-2024-on-Top-up-Tax-on-MNEs.pdf))
- **Free zone?** Which free zone, what activities, who the customers are (free zone persons, mainland businesses, individuals), whether audited accounts exist, and whether the company has elected out of the QFZP regime.
- **Corporate Tax registration.** The date registered, the registration deadline, and whether a late registration penalty was imposed.
- **Losses brought forward**, the period they arose in, and any ownership change of more than 50% since then. ([Corporate Tax Law](https://mof.gov.ae/wp-content/uploads/2026/01/Federal-Decree-Law-No.-47-of-2022-and-its-amendments-en-v13.1.26.pdf))
- **Interest expense and EBITDA**, if net interest is large.
- **Related party and connected person transactions:** owners, directors, family members, group companies, and payments to them.
- **Entertainment, fines, owner drawings and personal expenses** in the accounts.
- **Returns already filed or due**, especially for periods ending 31 December 2025 (due 30 September 2026).

## The method, step by step

1. **Decide whether the person is a Taxable Person.** A juridical person resident in the UAE is always one, including a free zone company. A natural person is one only if their business turnover is more than AED 1,000,000 in the calendar year, not counting wages, personal investment income or real estate investment income. Check exemptions (government entities, qualifying public benefit entities, qualifying funds and others under Article 4) and refer them out. ([Cabinet Decision No. 49 of 2023](https://tax.gov.ae/DataFolder/Files/Legislation/05-06-2023/3/Cabinet%20Decision%20No.%2049%20of%202023%20-%20for%20publishing.pdf))
2. **Check registration.** Every Taxable Person registers on EmaraTax by the deadline in FTA Decision No. 3 of 2024 (table below), including businesses that will claim Small Business Relief and free zone companies.
3. **Fix the tax period.** It is the financial year, meaning the Gregorian calendar year or the 12-month period for which financial statements are prepared (Article 57). Changing it needs an application to the FTA (Article 58).
4. **Test Small Business Relief** for a resident person. Revenue must be AED 3,000,000 or less in this period *and in every previous period*. The period must end on or before 31 December 2029. The person must not be a QFZP or a constituent company of a multinational group. If eligible and the client wants it, elect it on the return. Taxable income is then treated as nil and a simplified return is filed. ([Ministerial Decision No. 73 of 2023](https://tax.gov.ae/Datafolder/Files/Legislation/Corporate%20Tax/Ministerial%20Decision%20No.%2073%20of%202023%20-%20for%20publishing.pdf))
5. **For a free zone company, test QFZP status**: adequate substance, qualifying income, the de minimis test, arm's length compliance with transfer pricing documentation, audited financial statements, and no election out. If any condition fails, it is taxed like a mainland company for that period and the next four.
6. **Compute taxable income** (Article 20): start from accounting net profit under IFRS (or IFRS for SMEs where allowed). Remove exempt income (for example qualifying dividends and participation income, Articles 22-23). Add back non-deductible items: 50% of entertainment, fines, bribes, owner drawings, Corporate Tax itself, recoverable input VAT, and donations to bodies that are not qualifying public benefit entities (Articles 28, 32, 33). Apportion mixed personal and business costs. ([Corporate Tax Law](https://mof.gov.ae/wp-content/uploads/2026/01/Federal-Decree-Law-No.-47-of-2022-and-its-amendments-en-v13.1.26.pdf))
7. **Apply the interest limitation** if net interest expense is more than AED 12,000,000: the deduction is the higher of AED 12,000,000 and 30% of tax-adjusted EBITDA. The excess carries forward for 10 periods. ([Ministerial Decision No. 126 of 2023](https://tax.gov.ae/Datafolder/Files/Pdf/2023/Ministerial%20Decision%20No.%20126%20of%202023%20on%20the%20General%20Interest%20Deduction%20Limitation%20Rule%20-%20for%20publishing.pdf))
8. **Adjust related party and connected person transactions to arm's length** (Articles 34-36).
9. **Deduct brought-forward losses**, oldest first, up to 75% of taxable income before loss relief (Article 37). ([Corporate Tax Law](https://mof.gov.ae/wp-content/uploads/2026/01/Federal-Decree-Law-No.-47-of-2022-and-its-amendments-en-v13.1.26.pdf))
10. **Apply the rates**: 0% on the first AED 375,000 of taxable income and 9% on the rest. A QFZP pays 0% on qualifying income and 9% on all other taxable income, with no AED 375,000 band. ([Corporate Tax Law](https://mof.gov.ae/wp-content/uploads/2026/01/Federal-Decree-Law-No.-47-of-2022-and-its-amendments-en-v13.1.26.pdf))
11. **Take credits** (foreign tax credit, capped at the UAE tax on the same income; withholding tax credit) and compute tax payable.
12. **File and pay within 9 months** of the end of the period on EmaraTax, and keep records for 7 years.

## Rates and thresholds for 2026

### Rates ([Corporate Tax Law, Article 3](https://mof.gov.ae/wp-content/uploads/2026/01/Federal-Decree-Law-No.-47-of-2022-and-its-amendments-en-v13.1.26.pdf); [Cabinet Decision No. 116 of 2022](https://tax.gov.ae/Datafolder/Files/Legislation/Corporate%20Tax/Cabinet%20Decision%20No.%20116%20of%202022%20-%20for%20publishing.pdf); [Free Zone Persons bulletin](https://tax.gov.ae/Datafolder/Files/Pdf/2024/CT%20Bulletin/Basic%20Tax%20Information%20bulletin-%20Free%20Zone%20Person-English.pdf))

| Who | Taxable income | Rate |
| --- | --- | --- |
| Taxable Person (not a QFZP) | Portion not exceeding AED 375,000 | 0% |
| Taxable Person (not a QFZP) | Portion exceeding AED 375,000 | 9% |
| Qualifying Free Zone Person | Qualifying Income | 0% |
| Qualifying Free Zone Person | All taxable income that is not Qualifying Income (no AED 375,000 band) | 9% |
| Non-resident with no permanent establishment or nexus | UAE-sourced income, as withholding tax | 0% |

- The AED 375,000 band is given once per Taxable Person per tax period, however many businesses it runs. Splitting a business artificially to get more than one band is treated as tax avoidance (Cabinet Decision No. 116 of 2022, Article 2).
- A multinational group in scope of top-up tax pays extra tax so that its effective rate in the UAE reaches 15% (Corporate Tax Law, Article 3(3)). See the top-up tax section.

### Natural persons ([Cabinet Decision No. 49 of 2023](https://tax.gov.ae/DataFolder/Files/Legislation/05-06-2023/3/Cabinet%20Decision%20No.%2049%20of%202023%20-%20for%20publishing.pdf); [Small business bulletin](https://tax.gov.ae/Datafolder/Files/Pdf/2026/CT_TaxB_ulletin_EN_V5.pdf))

| Rule | Detail |
| --- | --- |
| Threshold | Total business turnover (gross income) **more than** AED 1,000,000 in a Gregorian calendar year |
| At or below AED 1,000,000 | Not subject to Corporate Tax and not required to register |
| Never business income | Wages; personal investment income; real estate investment income that does not need a licence |
| Relationship to Small Business Relief | The AED 1,000,000 registration threshold is separate from the AED 3,000,000 relief threshold |

### Small Business Relief ([Corporate Tax Law, Article 21](https://mof.gov.ae/wp-content/uploads/2026/01/Federal-Decree-Law-No.-47-of-2022-and-its-amendments-en-v13.1.26.pdf); [Ministerial Decision No. 73 of 2023](https://tax.gov.ae/Datafolder/Files/Legislation/Corporate%20Tax/Ministerial%20Decision%20No.%2073%20of%202023%20-%20for%20publishing.pdf); [Ministerial Decision No. 131 of 2026](https://mof.gov.ae/wp-content/uploads/2026/08/Ministerial-Decision-No.-131-of-2026-Amending-Certain-Provisions-of-Ministerial-Decision-No.-73-of-2023-on-Small-Business-Relief-for-the-Purposes-of-Federal-Decree-Law-No.-47-of-2022-EN.pdf))

| Condition or effect | Rule |
| --- | --- |
| Who | A Resident Person that is a Taxable Person, natural or juridical |
| Revenue test | Revenue of AED 3,000,000 or less in the current tax period **and in every previous tax period**; one period over the threshold ends eligibility for good |
| Periods covered | Tax periods starting on or after 1 June 2023 and ending on or before 31 December 2029 (extended from 31 December 2026 by Ministerial Decision No. 131 of 2026, issued 29 July 2026) |
| Excluded | A Qualifying Free Zone Person; a constituent company of a multinational group under Cabinet Decision No. 44 of 2020 (group consolidated revenue of at least AED 3.15 billion) |
| How | Register, then elect in the tax return for **each** period; it is not automatic |
| Effect | Treated as having no taxable income; simplified return; no Corporate Tax |
| What switches off | Exempt income, reliefs, deductions, tax loss relief and transfer pricing documentation (Article 55) do not apply in a relief year. Transactions must still be at arm's length when measuring revenue |
| Losses | A loss of a relief year cannot be carried forward. Losses from earlier non-relief years cannot be used in a relief year but survive for later non-relief years |
| Interest | Net interest expenditure of a relief year cannot be carried forward; earlier disallowed interest survives for non-relief years |
| Anti-splitting | Artificially splitting a business to stay under AED 3,000,000 is treated as tax avoidance |
| Accounts | Cash-basis financial statements are allowed when revenue does not exceed AED 3,000,000 |

Revenue means gross income under the accounting standards applied, not profit ([Small Business Relief Guide](https://tax.gov.ae/Datafolder/Files/Guides/CT/Small%20Business%20Relief%20Guide%20-%20EN%20-%2029%2008%202023.pdf)). The FTA's small business bulletin still says periods ending on or before 31 December 2026. Ministerial Decision No. 131 of 2026 replaces that text, so rely on the Decision.

### Qualifying Free Zone Persons ([Cabinet Decision No. 100 of 2023](https://tax.gov.ae/Datafolder/Files/Legislation/Cabinet%20Decision%20No.%20100%20of%202023%20on%20Determining%20Qualifying%20Income%20for%20the%20Qualifying%20Free%20Zone%20Person%20-%20for%20publishing.pdf); [Ministerial Decision No. 229 of 2025](https://tax.gov.ae/Datafolder/Files/Pdf/2025/MD-No-229.pdf); [Free Zone Persons bulletin](https://tax.gov.ae/Datafolder/Files/Pdf/2024/CT%20Bulletin/Basic%20Tax%20Information%20bulletin-%20Free%20Zone%20Person-English.pdf))

A Free Zone Person is a juridical person incorporated, established or registered in a free zone. Individuals and unincorporated partnerships cannot be Free Zone Persons. A Free Zone Person is a QFZP only while it meets **all** of these conditions (Corporate Tax Law, Article 18):

- It keeps adequate substance in the free zone or designated zone: core income-generating activities carried on there, with adequate assets, qualified full-time staff and operating costs. Outsourcing is allowed only within a free zone and under adequate supervision.
- It derives Qualifying Income.
- It has not elected to be taxed at the standard rates.
- It complies with the arm's length principle and keeps transfer pricing documentation.
- It prepares audited financial statements.
- Its non-qualifying revenue does not exceed 5% of total revenue or AED 5,000,000, whichever is lower (the de minimis test in Ministerial Decision No. 229 of 2025, Article 3).

**Qualifying Income** is income from transactions with other Free Zone Persons (who must be the beneficial recipients), except income from Excluded Activities. It also includes income from transactions with anyone for Qualifying Activities, qualifying intellectual property income, and other income while the de minimis test is met.

**Qualifying Activities** (MD 229 of 2025): manufacturing and processing of goods or materials; trading of qualifying commodities; holding shares and other securities for investment; ownership, management and operation of ships; reinsurance; fund management; wealth and investment management; headquarter services and treasury and financing services to related parties or for its own account; aircraft financing and leasing; distribution of goods or materials in or from a designated zone; logistics services; and ancillary activities.

**Excluded Activities** are always non-qualifying:
- transactions with natural persons, except for ships, fund management, wealth management and aircraft leasing;
- banking;
- insurance, other than reinsurance and captive insurance within headquarter services;
- finance and leasing, subject to the exceptions in MD 229;
- ownership or exploitation of immovable property, other than commercial property in a free zone let to a Free Zone Person.

Always taxed at 9% even for a QFZP: income of a domestic or foreign permanent establishment (for example a mainland branch), most immovable property income, and non-qualifying intellectual property income.

**Consequence of failing:** a QFZP that fails any condition, or elects out, is taxed at the standard rates from the start of that tax period **and for the four following tax periods**.

A QFZP distributing goods in or from a designated zone also needs an agreed-upon procedures report from its auditor, for periods starting on or after 1 January 2026 ([FTA Decision No. 6 of 2026](https://tax.gov.ae/Datafolder/Files/Legislation/2026/FTA%20Decision%20No.%206%20of%202026%20on%20Determining%20the%20Additional%20Procedures%20for%20the%20Compliance%20of%20QFZP%20-%20for%20publishing%20-%2007%202026.pdf)).

### Deductions and add-backs ([Corporate Tax Law, Articles 28, 32 and 33](https://mof.gov.ae/wp-content/uploads/2026/01/Federal-Decree-Law-No.-47-of-2022-and-its-amendments-en-v13.1.26.pdf))

| Item | Treatment |

From openaccountants/openaccountants, AGPL-3.0.

More from openaccountants/openaccountants