The United Arab Emirates has long been associated with a favorable environment for doing business. Attractive conditions, the absence of excessive requirements, and flexibility for international companies have made this jurisdiction one of the most popular in the world. But the rules are changing. Now, like in other countries, the UAE is introducing a corporate tax, which has become an important part of financial planning for businesses in the Emirates.

Therefore, every entrepreneur must understand the nuances of taxation, keep up with new regulations, and know how they affect the company’s operations. And b2bconsulting consultants help with these matters. What is corporate tax, why is it needed, and how to adapt to the new rules — read on in this article.

What is Corporate Tax?

Corporate Tax is a tax on the profits of legal entities, introduced in the UAE starting from June 1, 2023.
It was enacted under Federal Decree-Law No. 47 of December 9, 2022, to align the domestic framework with international standards.

The UAE corporate income tax applies to all companies registered in the country,
as well as to foreign entities if they have a permanent establishment in one of the Emirates.
The introduction of this system does not diminish the jurisdiction’s appeal: the rate remains one of the lowest in the world,
and for certain categories of businesses, exemptions of up to 0% are provided.

How Does Corporate Tax Work and Who Is Subject to It?

Key Provisions

Corporate tax in the UAE is applied to the net profit of a company — that is, income minus expenses related to business activities.
The obligation to pay tax arises if the annual profit exceeds AED 375,000.
Below this threshold, the rate is 0%, and once exceeded — 9%.

This rule applies to all legal entities operating in the country, except in specifically defined cases,
which we will discuss later. The rate is fixed and does not depend on the type of business or the emirate in which the company is registered.
This makes corporate taxation in the UAE clear and predictable — which is crucial for financial planning.

What Types of Businesses Are Subject to Corporate Tax?

The following categories are covered by the law:

• – local and international companies registered in the UAE, including public joint stock companies, private joint stock companies, and limited liability companies;
• – branches and permanent establishments of foreign entities;
• – partnerships and any other entities recognized as legal persons under UAE law.

Individual entrepreneurs and freelancers registered through the Emirates Business Model may also fall under the scope of the law if their income exceeds the non-taxable threshold.

Who Is Exempt from Paying Corporate Tax?

Certain categories are exempt from paying corporate income tax. These include:

• – government entities;
• – charitable organizations (approved by the FTA);
• – investment funds with appropriate status;
• – small businesses with annual income not exceeding AED 375,000;
• – individuals.
•  

In addition, companies registered in free economic zones may be exempt from tax if they meet certain criteria, such as operating solely within the free zone. We will explain the conditions and special regimes in more detail later in the article.

Company Requirements

Companies subject to the tax must:

• – register with the Federal Tax Authority (FTA);
• – maintain accounting records in accordance with international standards;
• – retain documentation for at least 7 years;
• – submit an annual tax return — even if there is no taxable profit.

Failure to comply with these requirements may result in fines and the blocking of corporate accounts.
Corporate tax legislation in the UAE requires full transparency and accuracy in calculations.

How to Register with the Tax Authorities to Pay Corporate Tax?

In order for a company to pay corporate tax and submit tax returns, it must register with the UAE Federal Tax Authority — FTA. This is a mandatory requirement for all organizations subject to the law.

Corporate tax registration in the UAE is carried out online via EmaraTax — the main system provided by the Federal Tax Authority (FTA). To do this, you need to go through several steps:

1. – Create an account on the EmaraTax platform.
2. – Submit an application for registration.
3. – Attach the required documents.
4. – Wait for confirmation from the FTA.
5. – Update your internal documentation.

Step-by-Step Instructions

Step 1. Use a corporate e-mail address, trade license number, the manager’s Emirates ID, and other registration details.

Step 2. The form must include the company’s legal name, license number, business structure, and financial year start and end dates.

Step 3. Attach the required documents. These include: a copy of the trade license, passport or Emirates ID of the owner or manager, bank statement, and the company’s founding documents.

Step 4. The review usually takes a few working days. Once approved, the company receives a Tax Registration Number (TRN).

Step 5. After registration, you need to update your tax details (TRN) in contracts, invoices, and your accounting system.

How to Calculate Corporate Tax?

Tax Rate and Calculation Base

The UAE corporate income tax rate is 0% on profits up to AED 375,000 and
9% on the amount exceeding this threshold. The tax base is calculated from net profit, meaning income minus justified business expenses.

Expenses include rent, salaries, licensing fees, transportation, and procurement.
Personal expenses, as well as paid penalties, are not deductible from the tax base.
All data must be backed by documentation; otherwise, it will not be taken into account.

Calculation Example

Let’s assume the company’s annual net profit is AED 500,000.

The tax is calculated as follows:

• – the first AED 375,000 is not subject to tax (rate — 0%);
• – the remaining AED 125,000 is taxed at 9%.

Calculation: AED 125,000 × 9% = AED 11,250

Result: the total tax payable will be AED 11,250.

How to Submit Tax Returns and Reports?

The tax report is submitted annually, within 9 months after the end of the financial year.

The declaration must include the taxable profit and the amount of tax payable.

If the company cannot prepare the documents in time, it is possible to request an extension for filing the UAE corporate tax return.

However, this is only allowed before the deadline and with proper documentation.

Liability and Current Penalties

Taxes in the UAE are strictly monitored. Missing deadlines can lead to serious penalties:

• AED 10,000 — for late registration or improper record keeping;
• AED 20,000 — for repeated violations within 24 months;
• AED 500 per month — for failing to maintain records or improper document storage during the first 12 months;
• AED 1,000 — for repeated delays in reporting starting from the 13th month.

Some companies may underestimate the importance of meeting deadlines, but the maximum penalty can reach
up to 200% of the unpaid tax amount. The FTA makes no exceptions — even if the tax payable is zero,
the declaration must still be submitted.

What Mistakes Should Be Avoided?

Mistakes during the transition to the new tax system can cost a company its reputation, time, and money.

This is especially relevant for businesses in Dubai, where branches are often opened with international involvement and flexible management structures.

Here are the most common violations:

• – Late registration in EmaraTax and missing TRN;
• – Improper bookkeeping and lack of supporting documentation;
• – Ignoring deadlines for reporting and payments;
• – Inaccurate information in tax declarations;
• – Mistakes in determining the tax base (including undocumented expenses, underreporting income);
• – Breach of tax exemption conditions for companies in free zones.

Table of Common Mistakes

How Does Corporate Tax Affect Business?

After the UAE’s corporate tax law came into effect in 2025, companies had to rethink their management reporting and profit structures. Now, not only sales matter, but also the correct allocation of expenses, contract documentation, and recordkeeping.

For residents of free economic zones, special conditions apply. UAE corporate tax does not apply to free zone entities if the company complies with the requirements established by the local authorities. This approach helps maintain a 0% rate while increasing operational transparency — which is important both for the tax authority and for business partners.

Tax Exemptions and Relief

UAE legislation provides several scenarios in which a business may be exempt from paying corporate tax. A company may qualify for an exemption if it:

• – is a government or quasi-government entity;
• – is registered as a charitable organization (and approved by the FTA);
• – operates as a qualified investment fund;
• – conducts business exclusively outside the UAE (without a permanent establishment in the country).

For companies in free zones, a separate regime applies. If a company meets several conditions — including economic substance, operation within the zone, and no income from the mainland — a 0% tax rate may apply.

These provisions are defined in the UAE Corporate Tax Law and explained in the official commentary to Federal Decree-Law No. 47.

Corporate Tax in Free Zones

Companies registered in free economic zones may qualify for preferential tax treatment. To be eligible, a company must:

• – hold a license issued by a free zone authority;
• – conduct actual business activities within the zone;
• – earn income only from clients outside the zone or from other companies within the zone;
• – meet economic substance requirements;
• – submit separate financial statements;
• – obtain the status of a qualified free zone taxpayer.

Otherwise, the standard corporate tax rate of 9% applies, regardless of location.
Therefore, benefiting from preferential treatment requires not only registration, but also full legal and accounting compliance.

Useful Insights

• – Separate reporting is mandatory for companies seeking qualified free zone status. Without it, the FTA will automatically apply the general tax rules.
• – Financial year is selected during registration. It may coincide with the calendar year or start from the date the license was issued. Changes to the financial year are only allowed with FTA approval.
• – Dividends and interest received from UAE subsidiaries are generally not subject to tax if the resident company holds at least 5% of the shares, maintains the participation for at least 12 months, and the source company is not offshore and not restricted by the FTA.
• – Tax is payable only after submitting the return, not in advance. This allows all expenses to be considered and the tax base to be optimized by the end of the period.
• – All documents must be stored for at least 7 years, including in cases where the tax rate is 0%.

Conclusion

The introduction of corporate tax has become a significant milestone in the evolution of the UAE’s business environment. On the one hand, the rate remains one of the lowest in the world.

On the other hand, companies are now required to maintain accurate records, calculate profits, submit reports, and comply with tax obligations.

For those operating in Dubai, a special procedure applies — especially if the business is registered in a free zone.
Understanding the details and registering on time helps avoid fines and mistakes that could impact the company’s reputation and financial stability.

If you need consultation on UAE corporate tax or assistance at any stage — from company registration to filing a tax return,

the specialists at b2bconsulting are ready to help. Contact us, and our corporate tax advisor in Dubai will assess your situation, explain the necessary steps for your company, and help you make the right decision.