Tax · Updated 2026-05-13 - UAE Corporate Tax 9% Explained (2026)

The UAE introduced Corporate Tax in June 2023 — for the first time in the country's history, businesses pay 9% on profits above AED 375,000. The headline is simple; the rules that decide who pays 9%, who pays 0%, who pays 15%, and who pays nothing at all are not. This piece walks every rule that matters to a founder considering UAE company formation in 2026.

Balmiki Kumar · Founder · 10 years UAE corporate services

Last updated 13 May 2026 · Reviewed against 2026 UAE regulations

The tax-rate table

Seven scenarios. Where each one lands. Reading this once tells you 80% of what you need to know to plan around UAE Corporate Tax.

Entity / income type	Threshold	Rate	Notes
Mainland LLC, all income	AED 0 – 375,000	0%	First AED 375,000 of taxable profit is at 0% by default.
Mainland LLC, all income	Above AED 375,000	9%	Standard rate applies on the slice above AED 375,000.
Free Zone Person — Qualifying Income	Unlimited	0%	If QFZP conditions met. Includes transactions with other Free Zone Persons + Qualifying Activities.
Free Zone Person — Non-Qualifying Income	AED 0 – 375,000	0%	Standard threshold still applies to the non-qualifying portion.
Free Zone Person — Non-Qualifying Income	Above AED 375,000	9%	Non-qualifying income above threshold is taxed normally.
Multinational Group (>EUR 750M global revenue)	All profits	15%	Domestic Minimum Top-up Tax (DMTT), effective 1 Jan 2025.
Small Business Relief (mainland)	Below AED 3M revenue (cumulative test)	0%	Elective. Available through 31 Dec 2026. Not stackable with QFZP.

The five QFZP conditions

Free Zone companies pay 0% on Qualifying Income — but only if they maintain Qualifying Free Zone Person status. All five conditions must hold every tax period.

1. Adequate substance in the Free Zone. The entity must have an actual presence in the free zone — staff, premises, expenditure proportionate to the business. A pure mailbox-address entity does not pass. The Free Zone authority issues licences; the Federal Tax Authority assesses substance.
2. Derive Qualifying Income. The income that benefits from the 0% rate must come from: (a) other Free Zone Persons (not from Excluded Activities); (b) non-Free Zone Persons from Qualifying Activities; (c) any other income meeting de minimis thresholds.
3. Not elect standard taxation. A Free Zone Person can voluntarily opt to be taxed at the standard 9% rate — typically chosen by businesses whose income mix doesn't fit the QFZP framework. Once elected, the choice locks in for the current and next four tax periods.
4. Comply with Transfer Pricing rules. All transactions between the Free Zone Person and Related Parties (parent, subsidiaries, common control entities) or Connected Persons (founders, family) must be at arm's length and documented per the OECD-aligned UAE Transfer Pricing regulations.
5. Maintain audited financials. Every QFZP must prepare audited financial statements in accordance with International Financial Reporting Standards (IFRS), regardless of revenue size. This is the condition most newly-formed Free Zone companies miss in year 1 — and it's a hard requirement, not a recommendation.

Qualifying Activities (the 0% list)

Income from these activities qualifies for the 0% Free Zone rate even when the customer is a non-Free Zone Person. Cabinet Decision No. 100 of 2023 is the canonical source.

Manufacturing of goods or materials

Processing of goods or materials

Trading of qualifying commodities

Holding of shares + other securities

Ship ownership, management + operation

Reinsurance services

Fund management services (regulated by competent authority)

Wealth + investment management services

Headquarters services to Related Parties

Treasury + financing services to Related Parties

Financing + leasing of aircraft + engines + components

Distribution in or from a Designated Zone

Logistics services

Activities ancillary to any qualifying activity above

Excluded Activities (always 9%)

Income from these activities is taxed at 9% above the AED 375,000 threshold regardless of QFZP status. If you operate in any of these areas as more than incidental income, plan for the 9% rate.

• Banking (most banking income, with narrow free-zone exceptions)
• Insurance + reinsurance (general; reinsurance is qualifying)
• Finance + leasing activities (with limited exceptions)
• Ownership + exploitation of immovable property OTHER than commercial property used by the Free Zone Person within the Free Zone
• Ownership + exploitation of intellectual property OTHER than Qualifying IP

Registration + filing calendar

1. Register with the FTA within 3 months of incorporation if you're a new company formed in 2026. Pre-existing entities follow the FTA's 2024 schedule based on licence-issue month. Late registration penalty: AED 10,000.

2. File your first Corporate Tax return within 9 months of your first Tax Period end. For a calendar-year entity formed in 2026, that's by 30 September 2027. The return reports profits, claimed reliefs, QFZP status, and any losses being carried forward.

3. Pay any Corporate Tax due at the same time as filing the return (within 9 months of period end). No quarterly advance-tax payments — UAE Corporate Tax is annual settlement.

4. Keep records for 7 years. The FTA requires accounting and supporting documentation to be retained for 7 years from the end of the Tax Period to which they relate.

5. File a VAT return quarterly if separately VAT-registered. UAE VAT (5%) is a different tax with a different filing cadence — don't confuse Corporate Tax annual with VAT quarterly.

Common founder questions

What is the UAE Corporate Tax rate in 2026?

UAE Corporate Tax is 9% on taxable profits above AED 375,000 per financial year. Profits at or below AED 375,000 are taxed at 0%. The tax came into effect for financial years starting on or after 1 June 2023. There is also a 15% Domestic Minimum Top-up Tax for multinational groups with global revenue above EUR 750 million, effective 1 January 2025.

Do UAE free zone companies pay 9% corporate tax?

Only on non-qualifying income above AED 375,000. A Qualifying Free Zone Person (QFZP) pays 0% on Qualifying Income and 9% on the rest. To remain a QFZP, the entity must (a) maintain adequate substance in the free zone, (b) derive Qualifying Income, (c) not elect to be taxed at standard rates, (d) comply with the Transfer Pricing rules, and (e) prepare audited financial statements. Failing any condition flips the entity to 9% on all profits above AED 375,000 for that year and the next four years.

What is Qualifying Income for a Free Zone Person?

Qualifying Income includes: (1) income from transactions with other Free Zone Persons (not from Excluded Activities); (2) income from transactions with non-Free Zone Persons but only from Qualifying Activities; (3) any other income that qualifies under the de minimis requirements. Excluded Activities (always 9%) include: banking, insurance, finance & leasing (with limited exceptions), ownership/exploitation of immovable property other than commercial property within the Free Zone, and ownership/exploitation of intellectual property other than Qualifying IP.

When do I have to register for UAE Corporate Tax?

Every taxable person — including all UAE free zone companies — must register with the Federal Tax Authority (FTA) regardless of whether they expect to pay tax. The deadline depends on the trade-licence issue date. The FTA published a schedule in early 2024: licences issued in January–February register by 31 May 2024, March–April by 30 June 2024, etc. New companies formed in 2026 must register within 3 months of incorporation. Penalty for late registration: AED 10,000.

Is UAE Corporate Tax the same as UAE VAT?

No — they're separate taxes with separate thresholds and returns. Corporate Tax is 9% on taxable PROFITS above AED 375,000. VAT is 5% on taxable SUPPLIES (revenue) above AED 375,000 of taxable turnover. Most operating UAE companies need to handle both. VAT registration is mandatory above AED 375,000 revenue; voluntary above AED 187,500. Returns are quarterly for VAT, annual for Corporate Tax.

Do I need to file a Corporate Tax return even if I owe 0%?

Yes. Every UAE Corporate Tax registered entity must file an annual Corporate Tax return within 9 months of the end of the relevant Tax Period, even if the taxable income is below AED 375,000 (i.e. 0% tax owed). The return reports the profit calculation, any small business relief claimed, and the QFZP status if applicable. Failing to file: AED 1,000 first month + AED 1,000/month escalating thereafter.

What is Small Business Relief in UAE Corporate Tax?

If your taxable revenue is below AED 3,000,000 in the current AND each prior tax period (where applicable), you can elect Small Business Relief — be treated as having no taxable income for that period. Available through 31 December 2026 (the relief sunsets unless extended). Useful for businesses that earn between AED 375,000 and AED 3 million and want simpler reporting. Not available for Free Zone Persons claiming QFZP status — pick one path.

Are there any UAE Corporate Tax exemptions?

Yes — specific categories are exempt from Corporate Tax regardless of profit level: (1) Government Entities + Government Controlled Entities; (2) extractive businesses + non-extractive natural resource businesses (taxed under emirate-level frameworks instead); (3) qualifying public benefit entities; (4) qualifying investment funds; (5) public/private pension and social security funds; (6) wholly-owned and controlled UAE subsidiaries of (1), (3), (4), or (5). Most private SME founders fall outside these exemptions.

Disclaimer: This guide is editorial and reflects publicly available UAE Federal Tax Authority rules as of 2026-05-13. It is not tax advice. UAE Corporate Tax application depends on specific facts of each business; consult a licensed UAE tax advisor or audit firm for your particular situation. The Formenzo formation platform doesn't provide tax advice but helps founders connect with licensed advisors in the post-formation step.