What Is UAE Corporate Tax?
The UAE introduced a 9% federal corporate tax effective June 1, 2023. This applies to all businesses with taxable income exceeding AED 375,000. Income below this threshold is taxed at 0%.
Despite this change, the UAE remains one of the lowest-tax jurisdictions globally, and there is still no personal income tax.
Who Must Register?
- All UAE mainland companies (LLCs, sole establishments, civil companies)
- Free zone companies (even if qualifying for 0% rate)
- Foreign companies with a permanent establishment in UAE
- Individual business owners earning above AED 1 million
Exempt: Government entities, pension funds, qualifying investment funds, natural resource extraction businesses.
Free Zone Tax Benefits
Free zone companies can qualify for 0% corporate tax on qualifying income if they:
- Maintain adequate substance in the UAE (office, staff, decisions made locally)
- Earn qualifying income (free zone transactions, international services)
- Do not earn non-qualifying income from mainland UAE activities
- Meet transfer pricing requirements
- Keep audited financial statements
Non-qualifying income (e.g., mainland customer revenue) is taxed at 9%.
Key Deadlines and Penalties
- Registration: All businesses must register with the Federal Tax Authority (FTA) based on license issuance date
- Filing: Tax returns due within 9 months of tax period end
- Payment: Due by the filing deadline
Penalties:
- Late registration: AED 10,000
- Late filing: AED 500 first offense, AED 1,000+ repeat
- Late payment: 2-4% of unpaid tax monthly
How PS Business UAE Helps
Our tax team assists with:
- Corporate tax registration with FTA
- Tax return preparation and filing
- Free zone qualification assessment
- Transfer pricing documentation
- Ongoing tax compliance and advisory
- Bookkeeping and accounting services
Frequently Asked Questions
Do free zone companies pay corporate tax?
Free zone companies must register but can qualify for 0% on qualifying income. Non-qualifying income (from mainland customers) is taxed at 9%.
What is the tax-free threshold?
The first AED 375,000 of taxable income is taxed at 0%. Only income above this amount is taxed at 9%.
Do I need an accountant?
While not legally required for all businesses, maintaining proper financial records is mandatory. We strongly recommend professional accounting services for corporate tax compliance.