Corporate tax in the UAE is no longer new, but a lot of small business owners are still not registered, not sure what applies to them, or waiting until something forces them to act.
The rate and the threshold
The UAE introduced a federal corporate tax in June 2023. The rate is 9% on taxable business profits exceeding AED 375,000 per year. Profits below that threshold are taxed at 0%.
Registration is mandatory
Every business in the UAE needs to register with the Federal Tax Authority for corporate tax, even if your profits are below the threshold and you expect to pay zero tax. Registration is mandatory. Failure to register carries a penalty of AED 10,000.
If your company was incorporated in 2024 or later, you must register within 3 months of your license issuance date. Do not wait.
Freezone companies
Freezone companies can benefit from a 0% corporate tax rate on qualifying income if they meet specific conditions. These include maintaining adequate substance in the UAE, earning qualifying income as defined by the law, and complying with transfer pricing rules.
If you do not meet the qualifying conditions, the standard 9% rate applies. Being in a freezone does not automatically mean 0% tax. You need to meet the qualifying criteria.
VAT is separate
VAT is separate from corporate tax. The UAE has a 5% VAT rate. If your annual revenue exceeds AED 375,000, VAT registration is mandatory.
The FTA is enforcing
The FTA is actively enforcing compliance. Penalties for late registration, late filing and incorrect returns are real and increasing. If you have not registered yet, do it now. The penalty for late registration is a flat AED 10,000, and that is before any penalties for late filing.
How I can help
I handle corporate tax registration and FTA setup for all my clients as part of the company formation process. If you have an existing company that is not yet registered, I can handle the registration and make sure your records are in order. Do not wait for a penalty notice to take action.
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