UAE corporate tax: what a founder actually has to do

Corporate tax is imposed by Federal Decree-Law No. 47 of 2022 and applies to financial years beginning on or after 1 June 2023. It is administered by the Federal Tax Authority through EmaraTax. Almost every founder-scale question about it resolves into four decisions, and this guide works towards them: elect Small Business Relief or not; chase the free-zone 0% or not; when audited accounts become unavoidable; and whether multiple entities should be grouped.

This is a guide, not tax advice. Every figure below names the instrument it comes from so you can check it at source.

Who is a taxable person

The law splits taxable persons into residents and non-residents. A company is resident if it is incorporated in the UAE — or if it is a foreign entity that is effectively managed and controlled from the UAE. That second limb catches more people than expected. A company incorporated offshore but run day to day from a Dubai apartment is a UAE resident taxable person, and its registration deadline runs from its financial year end rather than from incorporation.

A natural person — a sole trader, a freelancer on a licence, an individual partner — is in scope only for business activity, and only above a threshold. Cabinet Decision No. 49 of 2023 sets it at AED 1,000,000 of turnover in a Gregorian calendar year, and excludes three things from that test entirely regardless of amount: employment income, personal investment income, and real estate investment income where no licence is required.

Note that this is a turnover test, not a profit test. A freelancer billing AED 1.2m and netting AED 300,000 is in scope. The 0% band and Small Business Relief usually mean no tax is payable — but registration and filing obligations bite from that point.

Non-residents are taxed on income attributable to a permanent establishment in the UAE, on state-sourced income, and on income attributable to a nexus — which Cabinet Decision No. 56 of 2023 defines narrowly as income from immovable property in the UAE.

The rates, and what the AED 375,000 is not

Cabinet Decision No. 116 of 2022 sets the structure: 0% on taxable income up to AED 375,000, and 9% on the excess. It is a band, not an allowance floor and not a cliff. A company with AED 500,000 of taxable income pays 9% on AED 125,000 — AED 11,250.

Two things it is not. It is not linked to the AED 375,000 VAT registration threshold, which is a supplies-based trigger under an entirely separate regime; the two numbers are coincidentally identical and founders routinely assume one implies the other. And it does not stack with the free-zone 0%: non-qualifying income of a free-zone company is taxed at 9% from the first dirham.

There is a second rate, and it will not apply to you unless you are part of a very large group. The UAE's Domestic Minimum Top-up Tax (Cabinet Decision No. 142 of 2024) applies from financial years starting on or after 1 January 2025 to constituent entities of multinational groups with consolidated global revenue of EUR 750 million or more, topping the effective rate up to a 15% minimum. It matters in exactly one practical case: a small UAE subsidiary of a large foreign group is in scope, because the test is applied at group level.

Small Business Relief — and the 2029 extension

This is the most useful relief available to the audience of this guide, and it changed in 2026.

Ministerial Decision No. 73 of 2023 lets a resident person — company or individual — elect to be treated as having derived no taxable income in a period where revenue is AED 3,000,000 or less in that period and in every previous period. As originally drafted it ran only to periods ending on or before 31 December 2026. Ministerial Decision No. 131 of 2026 extends it to tax periods ending on or before 31 December 2029, with the AED 3,000,000 threshold unchanged. A large amount of commentary still online says the relief ends in 2026; that material predates the extension.

Three mechanics matter.

• It is an election, made per tax period, in the return. It is not automatic, and it is not a tax-free threshold. You must still register, and you must still file — a simplified return, within the ordinary deadline.
• It costs you your carry-forwards. In a relief period you generate no tax loss to carry forward, and no disallowed net interest expenditure carries forward either. Transfer pricing documentation is switched off, but the arm's length principle still applies.
• Crossing AED 3m is permanent. Eligibility requires revenue at or below AED 3m in the current and all previous periods. Once you exceed it in any period, that limb can never be satisfied again.

Two groups cannot elect at all: qualifying free zone persons, and members of a multinational group with consolidated revenue above AED 3.15 billion. And splitting one trade across three licences to keep each under AED 3m is named in the decision itself as artificial separation of a business — an anti-abuse target under Article 50, not a plan.

The free-zone 0% — what it actually requires

A free-zone licence does not mean 0% corporate tax. It means the possibility of 0% on a defined subset of income, conditional on five tests, with a five-year penalty for failing any of them. Every free zone person must register and file regardless of the rate they end up paying.

To be a Qualifying Free Zone Person you must maintain adequate substance in the zone, derive qualifying income, not have elected into the standard regime, comply with the arm's length principle and keep transfer pricing documentation, meet the de minimis requirement, and prepare audited financial statements.

Two of those conditions do most of the damage in practice.

The activity list

Income from transactions with non-free-zone persons is qualifying only where it falls within the 13 qualifying activities set out in Ministerial Decision No. 229 of 2025, which repealed and replaced Ministerial Decision No. 265 of 2023 — anything you read citing MD 265 is out of date. The list is built for manufacturing, processing, qualifying commodity trading, holding securities for investment, ship ownership and operation, reinsurance, fund management, wealth and investment management, headquarter services to related parties, treasury and financing, aircraft financing and leasing, distribution in or from a designated zone, and logistics. Activities ancillary to those are dealt with separately.

The excluded activities are shorter and more consequential. The first one is any transaction with a natural person, subject to narrow exceptions. That single line removes the 0% thesis from most consumer-facing businesses: a free-zone e-commerce company selling to individuals has non-qualifying revenue on essentially every sale. Banking, insurance other than reinsurance, most finance and leasing, and ownership or exploitation of immovable property outside a narrow commercial-property carve-out are also excluded.

The de minimis rule

Non-qualifying revenue in a period must not exceed the lower of 5% of total revenue or AED 5,000,000. Read that twice: the lower. For any business below AED 100m of revenue the binding cap is the 5%. And it is a revenue test, not a profit test — breaching it does not tax the excess, it destroys qualifying status altogether.

A further requirement arrived for 2026. Under FTA Decision No. 6 of 2026, a QFZP carrying on distribution of goods in or from a designated zone must obtain an independent agreed-upon-procedures report under ISRS 4400, verifying that customers buy for resale and that the goods entered the UAE through a designated zone. It is due no later than 30 days after the corporate tax return deadline, and if it is not submitted the qualifying conditions are treated as not met.

For zone-by-zone selection — quota, cost, substance, and the cases where mainland is simply the better answer — see the free-zone selection guide linked below.

Registration, and the penalty most people find late

Registration is mandatory for every taxable person, including one that will pay nothing. There is no de minimis exemption from registration for a company.

FTA Decision No. 3 of 2024 set the phased deadlines for entities that existed before 1 March 2024, keyed to the month the earliest licence was issued, irrespective of year:

For entities incorporated on or after 1 March 2024 the deadline is three months from incorporation. A foreign company that is UAE-resident because it is managed from here has three months from its financial year end. A resident individual crossing the AED 1m turnover threshold must register by 31 March of the following calendar year.

Those dates are historic, which is exactly why they matter: a company that missed one has an accrued AED 10,000 late registration penalty sitting against it, and most owners discover it the first time they log into EmaraTax.

Registration itself is free, done through EmaraTax, and the FTA states a processing time of 20 business days on a complete application. You will need the incorporation certificate, the trade licence, and Emirates ID and passport for every owner holding 25% or more.

Deregistration has its own trap. You must apply within three months of ceasing to exist or ceasing business, and it is not granted until every outstanding return is filed and every penalty settled. Late deregistration costs AED 1,000 per month, capped at AED 10,000. Abandoning a licence is not the same as closing a company.

Filing, accounts and audit

The deadline is nine months from the end of the tax period, and filing and payment share that date — there is no later payment date and no instalment regime. A 31 December year end means 30 September. A return is required even where no tax is payable, including from a company electing Small Business Relief and from a QFZP whose income is entirely qualifying.

On accounting standards, Ministerial Decision No. 114 of 2023 sets IFRS as the default, permits IFRS for SMEs below AED 50,000,000 of revenue, and permits the cash basis below AED 3,000,000. That AED 3m is a different rule from the Small Business Relief AED 3m; they are the same number for unrelated purposes.

Audited financial statements became mandatory more widely in 2025. Under Ministerial Decision No. 84 of 2025, for tax periods commencing on or after 1 January 2025, audited accounts are required from any taxable person with revenue above AED 50,000,000, and from every qualifying free zone person regardless of size. Keep that separate from your free zone's own licence-renewal audit requirement — they are different obligations from different authorities, and merging them in your head leads to missing one.

Transfer pricing, at founder scale

The arm's length principle applies to all related-party and connected-person dealings with no size threshold. Only the documentation obligations are thresholded — a master file and local file are required where group revenue is AED 3.15 billion or more, or your own revenue is AED 200 million or more (Ministerial Decision No. 97 of 2023).

The rule that reaches an owner-managed company is the connected person rule. A payment to an owner, director or officer is deductible only to the extent it matches the market value of the service actually provided. Paying yourself an inflated salary to bring taxable income below AED 375,000 does not work, and it is a documented area of FTA focus.

Penalties

The schedule sits in Cabinet Decision No. 75 of 2023 as amended. The ones that matter to a small company:

Two consequences worth internalising. The late-filing penalty is per month and uncapped, so a dormant company that never files accrues an escalating charge rather than a fixed fine. And at 14% per annum the late-payment charge is well above UAE borrowing costs — there is no scenario in which the FTA is your cheapest lender.

What "no personal income tax" does and does not mean

The UAE government's own wording is that it does not levy income tax on individuals, and that is true as far as it goes. It covers salaries and wages — including a founder's salary from their own UAE company — plus personal investment income and real estate investment income of an individual. There is no federal capital gains tax on individuals, no wealth tax and no inheritance tax.

It does not cover the business income of a natural person. Trade in your own name above AED 1,000,000 of turnover in a calendar year and you are a taxable person under the corporate tax law: register, file, and pay 9% on taxable income above AED 375,000. That is corporate tax applying to an individual. And there is no exemption for a company because its owner is an individual — a one-person LLC is a juridical person and in scope from the first dirham of taxable income, subject to the band and the relief.

The four decisions

If you have not registered yet

• Find the month your earliest licence was issued — that fixed your original deadline.
• Work out when your first tax period ended. The waiver window is seven months from that date.
• If the window is open, file the first return now: the AED 10,000 registration penalty is waived or refunded.
• If it has closed, file anyway — the late-filing penalty is accruing monthly and does not stop on its own.