How does the UAE 9% corporate tax work for small businesses?

UAE corporate tax charges 0% on the first AED 375,000 of a business's taxable income and 9% on taxable income above that. Many small businesses can go further and elect Small Business Relief, which treats them as having no taxable income for a period, but only if their revenue stays at or below AED 3 million and only for tax periods ending on or before 31 December 2026. Almost every business still has to register with the Federal Tax Authority (FTA), even if it ends up paying nothing.

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This is general information, not tax or financial advice. Rules and dates change, so check with the Federal Tax Authority or a registered tax agent before acting.

The basic rates and who they apply to

The UAE's Corporate Tax Law applies to financial years starting on or after 1 June 2023, according to the Ministry of Finance. The Ministry has confirmed the taxable income threshold set by Cabinet Decision 116 of 2022:

• 0% on taxable income up to AED 375,000 in a tax period.
• 9% on taxable income above AED 375,000.

The tax is on taxable income (broadly, accounting profit after adjustments), not on revenue.

Worked example: a mainland company with AED 500,000 of taxable income pays nothing on the first AED 375,000 and 9% on the remaining AED 125,000, which is AED 11,250. A company with AED 300,000 of taxable income pays no corporate tax, but still has to register and file.

Sole traders and freelancers: individuals are only brought into corporate tax if their business turnover exceeds AED 1 million in a calendar year, under Cabinet Decision 49 of 2023. Wages, personal investment income and real estate investment income do not count towards that threshold.

How Small Business Relief works

Small Business Relief (SBR) is an election, not an automatic exemption. Under Ministerial Decision 73 of 2023 and the FTA's guidance:

• Who can elect: UAE resident persons, both companies and individuals in business.
• Revenue test: revenue must be AED 3 million or less in the current tax period and every previous tax period. Once you go above AED 3 million in any period, the relief is gone for good.
• Effect: you are treated as having no taxable income for that period, so no corporate tax is due.
• Time limit: it covers tax periods starting on or after 1 June 2023 and ending on or before 31 December 2026.
• Not available to: Qualifying Free Zone Persons, or members of multinational groups with consolidated revenue above AED 3.15 billion.

The FTA's own example shows how strict the "all previous periods" test is: a business with AED 4.3 million revenue in 2025 cannot use SBR for 2026, even though its 2026 revenue fell to AED 1.9 million.

The trade-offs of electing

SBR is simple, but it is not free of consequences:

• Losses: in a period where you elect SBR, you cannot use other reliefs, deductions or tax losses. The Ministry says losses and disallowed interest from periods where you did not elect can be carried forward to future periods where you also do not elect.
• Anti-abuse rule: if the FTA finds a business was artificially split to keep each part under AED 3 million, it can treat that as getting a tax advantage under the general anti-abuse rules.
• Transfer pricing: the FTA notes that SBR removes the need for transfer pricing documentation, but transactions with related parties must still follow the arm's length principle.

If you are making a loss in an early year, it may be worth checking with an adviser whether electing SBR or carrying the loss forward suits you better.

The 31 December 2026 end date

As published, SBR does not apply to tax periods ending after 31 December 2026. For a business with a calendar year end, the 2026 year is the last one covered. For a business with a different year end, check carefully whether each period ends before or after that date. At the time of writing, plan on the basis that from 2027 the normal 0% and 9% bands apply, and watch the Ministry of Finance and FTA websites for any extension or change.

Free zone companies

A free zone company is not automatically tax-free. Under Federal Decree-Law No. 47 of 2022, a Qualifying Free Zone Person pays 0% on its qualifying income and 9% on other taxable income. To qualify, the business must, among other things:

• keep adequate substance in the UAE;
• earn qualifying income as defined by Cabinet decision;
• not have elected to be taxed at the standard rates; and
• comply with transfer pricing rules.

If a business fails a condition at any point in a tax period, it stops being a Qualifying Free Zone Person from the start of that period. Because Qualifying Free Zone Persons are excluded from SBR, a small free zone company cannot simply rely on the AED 3 million test. Read the FTA's free zone guidance or speak to a tax agent before assuming your income qualifies.

Registering and filing: a step-by-step checklist

The Ministry of Finance states that all taxable persons, including free zone persons, must register and get a Corporate Tax Registration Number. The FTA's registration timelines say:

1. New resident companies incorporated on or after 1 March 2024 must apply within three months of incorporation.
2. Resident individuals whose business turnover passes the threshold must apply by 31 March of the following year.
3. Register on EmaraTax, the FTA's online portal, or through a registered tax agent.
4. Keep records of revenue and expenses for every period, especially if you plan to rely on SBR, since the FTA can request evidence.
5. File the return within nine months of the end of each tax period, according to the Ministry of Finance, including where you elect SBR or owe nothing.

Missing deadlines can lead to administrative penalties under Cabinet Decision No. 75 of 2023.

Key takeaways

• Corporate tax is 0% on taxable income up to AED 375,000 and 9% above it.
• Small Business Relief can reduce taxable income to nil if revenue has been AED 3 million or less in every period, but only for periods ending on or before 31 December 2026.
• Free zone companies only get 0% on qualifying income and cannot use Small Business Relief.
• Registration and annual returns apply even when no tax is due.
• Check the latest position with the FTA or a registered tax agent before deciding anything.

If you are still weighing up whether a move or a company set-up makes sense, Why Dubai Makes People Rich (and Who It Doesn't) includes a tax arithmetic chapter covering corporate tax, small business relief, free zones and registration, with a worked example and worksheets for running your own numbers. For other subjects, see the wider Asendify library of practical playbooks.

FAQ

Do I pay 9% on all my profit if I earn more than AED 375,000?

No. The 9% rate only applies to the part of taxable income above AED 375,000. The first AED 375,000 is taxed at 0%.

Do I need to register for corporate tax if I pay nothing?

In most cases, yes. The Ministry of Finance says all taxable persons, including free zone persons, must register, and returns are still filed when you elect Small Business Relief or owe no tax.

Can a free zone company claim Small Business Relief?

A Qualifying Free Zone Person cannot. A free zone business that is not a Qualifying Free Zone Person should check its position with the FTA or a registered tax agent.

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