Corporate Tax Framework
Effective June 1, 2023, the UAE implemented a federal Corporate Tax. It represents a fundamental shift in the jurisdiction's fiscal policy.
The Standard Rate
The standard statutory corporate tax rate is 9%. However, a 0% rate applies to taxable income up to AED 375,000 to support small businesses and startups.
| Taxable Income Segment | Applicable CT Rate |
|---|---|
| Up to AED 375,000 | 0% |
| Exceeding AED 375,000 | 9% |
| Qualifying Free Zone Persons | 0% (on Qualifying Income) |
Small Business Relief
Resident taxable persons with gross revenue not exceeding AED 3 million in the current and previous tax periods can elect to be treated as having derived no taxable income in that period.
Key Condition: This relief is temporary and only available for tax periods ending on or before December 31, 2026. Free Zone entities electing for the 0% Qualifying Income rate cannot claim Small Business Relief.
Free Zone Exemptions (QFZP)
A Free Zone entity can maintain a 0% tax rate if it meets the rigorous criteria of a Qualifying Free Zone Person (QFZP):
- Maintains adequate substance in the UAE.
- Derives "Qualifying Income" as specified by Cabinet Decisions.
- Has not elected to be subject to the standard 9% rate.
- Complies with Transfer Pricing rules and documentation.
- Prepares audited financial statements.
If non-qualifying income exceeds 5% of total revenue or AED 5 million (whichever is lower), the entity loses QFZP status and all income is taxed at 9%.
Frequently Asked Questions
Are salaries and personal income taxed?
No. Personal income, salary, and employment benefits remain completely tax-free at the federal level.
Is VAT still applicable?
Yes. VAT remains at 5% and operates completely independently of Corporate Tax.
Do I need to register if I make zero profit?
Yes. Every single legal entity (including dormant ones) must register for a TRN and file a nil return.
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