UAE Corporate Tax Rate 2026
Under the standard UAE corporate tax rules, the rate is 0% on taxable income up to AED 375,000 and 9% on the portion above AED 375,000. Corporate tax applies to financial years starting on or after June 1, 2023. It is charged on adjusted profit and is separate from VAT, which has a standard rate of 5%.
US citizens and Green Card holders who own a UAE company may also have US tax and reporting obligations. Depending on the entity’s US tax classification, ownership and income, US tax can arise even when profits stay in the business.
This article explains the UAE corporate tax bands, free zone rules, Small Business Relief, deadlines and penalties, and the main US reporting issues for owners of UAE businesses.
Aya Takriti, an IRS Enrolled Agent with 12 years of expat tax experience, specializes in US tax preparation, tax planning and tax advice for US citizens and Green Card holders living and working in the Middle East. *Schedule a consultation with Aya today.
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Table of Contents
UAE corporate tax at a glance
|
Rule |
What applies |
Limits and exceptions |
|
Standard rate |
0% up to AED 375,000 of taxable income; 9% on the excess. |
Applies to adjusted profit. QFZPs do not receive the AED 375,000 band. |
|
Start date |
Financial years starting on or after June 1, 2023 |
For an existing calendar-year company, the first period generally began January 1, 2024. |
|
Free zone companies |
0% on qualifying income; 9% on taxable income that is not qualifying income. |
A free zone licence alone is insufficient. De minimis and separately taxed income rules require review. |
|
Small Business Relief |
Eligible resident businesses with revenue of AED 3 million or less in the current and all previous tax periods. |
Available for periods ending by December 31, 2029. Elect on each return. QFZPs and specified large MNE group members are excluded. |
|
Large multinational groups |
15% domestic minimum top-up tax framework. |
Groups with at least EUR 750 million of consolidated revenue in two of the previous four financial years. |
|
Filing and payment |
Generally within nine months of the tax period end. |
December 31, 2026 year-end: September 30, 2027 deadline. |
|
US owners |
Possible US tax and information returns. |
Depends on US entity classification, ownership, activities and applicable elections. |
How is UAE corporate tax calculated?
UAE corporate tax is charged on taxable income, which starts from the accounting profit in your financial statements and is then adjusted under the tax law. Under the standard rules, the first AED 375,000 is taxed at 0%, and only the excess is taxed at 9%. A company with AED 500,000 of taxable income pays 9% on AED 125,000, or AED 11,250. Its effective rate is 2.25%.
Table 1. UAE corporate tax at different levels of taxable income
|
Taxable income (AED) |
Corporate tax at 9% above AED 375,000 (AED) |
Effective rate |
|
375,000 |
0 |
0% |
|
500,000 |
11,250 |
2.25% |
|
1,000,000 |
56,250 |
5.63% |
|
5,000,000 |
416,250 |
8.33% |
The table assumes the standard tax bands apply. It excludes Qualifying Free Zone Persons, businesses electing Small Business Relief, and any domestic minimum top-up tax. Effective rates are rounded to two decimal places where needed.
Who has to pay UAE corporate tax?
UAE corporate tax generally applies to UAE companies and other legal entities, including free zone companies. Foreign companies can also fall within scope through a UAE permanent establishment, a UAE nexus or effective management and control in the UAE. Statutory exemptions and special rules apply.
Individuals carrying on business in the UAE are generally within scope when their combined business turnover exceeds AED 1 million in a calendar year. This threshold applies to individuals, not to incorporated companies. Employment income and qualifying personal investment and real estate investment income are excluded from the individual’s business turnover test.
UAE companies subject to corporate tax generally need to register with the Federal Tax Authority (FTA) even when no tax is payable. Registration exceptions apply, and a domestic company’s UAE branch does not register separately from its parent. The FTA sets registration deadlines separately from return-filing deadlines.
Missed the US tax deadline? We can help.
Do free zone companies pay UAE corporate tax?
Yes. Free zone companies are subject to UAE corporate tax, but a Qualifying Free Zone Person (QFZP) can receive a 0% rate on qualifying income. Taxable income that is not qualifying income is subject to 9%. Holding a free zone licence alone does not establish eligibility.
To qualify, a free zone company must meet the applicable conditions, including:
- Maintain adequate substance in the relevant free zone, with appropriate assets, qualified employees and operating expenditure.
- Earn qualifying income under the applicable activity, customer and transaction rules. Certain transactions with mainland customers can qualify. The customer’s location alone does not determine the rate.
- Keep non-qualifying revenue within the lower of 5% of total revenue or AED 5 million, applying the prescribed exclusions from the calculation.
- Prepare audited financial statements and comply with the arm’s-length principle and applicable transfer pricing documentation rules.
- Have no election in force to be taxed under the standard corporate tax rules.
Meeting the de minimis limit can allow certain incidental income to be treated as qualifying income at 0%. It does not make all income eligible: special rules separately tax income from permanent establishments, specified immovable property and non-qualifying intellectual property.
If a company fails a QFZP condition, it generally loses that status from the start of the affected tax period and for the following four tax periods. Standard corporate tax rules then apply. A QFZP cannot use the AED 375,000 standard-rate band or elect Small Business Relief.
Is Small Business Relief still available?
Yes. On August 7, 2026, the Ministry of Finance announced Ministerial Decision No. 131 of 2026, extending Small Business Relief to tax periods ending on or before December 31, 2029. The previous cut-off was December 31, 2026. The AED 3 million revenue threshold remains unchanged.
An eligible resident taxable person can elect to be treated as having no taxable income for the period. The main conditions are:
- Elect Small Business Relief in the corporate tax return for each relevant period.
- Keep revenue at or below AED 3 million in the current and every previous tax period. Exceeding the limit in a previous tax period prevents a later claim under these rules, even if revenue subsequently falls.
- Be a UAE resident person for corporate tax purposes. Non-resident taxable persons cannot elect the relief.
- Be neither a QFZP nor a member of a multinational enterprise group excluded under the applicable rules, including the AED 3.15 billion consolidated group-revenue test.
- Continue to register, file the required return and keep supporting records.
Does the 15% minimum tax apply to my company?
The UAE domestic minimum top-up tax applies to entities in multinational groups with consolidated global revenue of at least EUR 750 million in at least two of the previous four financial years. It applies for financial years beginning on or after January 1, 2025. The framework can impose additional tax where the group’s effective UAE tax rate, calculated under its rules, falls below 15%. Most small businesses and standalone companies are outside its scope.
What has changed in UAE corporate tax since 2023?
Table 2. Key dates for UAE corporate tax
|
Date |
Change |
Why it matters |
|
January 31, 2022 |
The Ministry of Finance announces a federal corporate tax |
Began the rollout. |
|
June 1, 2023 |
Corporate tax applies to financial years starting on or after this date. |
The start of a company’s financial year determines its first tax period. |
|
January 1, 2024 |
The first tax period generally began for existing calendar-year companies. |
The first return was generally due September 30, 2025. |
|
January 1, 2025 |
Domestic minimum top-up tax begins for in-scope financial years. |
Only qualifying large multinational groups are affected. |
|
January 1, 2026 |
NCTI rules replace the former GILTI calculation for relevant 2026 tax years. |
US owners must distinguish the 2026 rules from the rules for 2025 returns. |
|
August 7, 2026 |
Small Business Relief extension to December 31, 2029 announced. |
Eligible businesses can continue electing the relief for qualifying periods. |
When do I register, file and pay UAE corporate tax?
Register through the FTA’s EmaraTax portal. A UAE-incorporated resident legal entity established on or after March 1, 2024 generally has three months from incorporation to apply. A resident individual whose UAE business turnover exceeds AED 1 million generally registers by March 31 of the following calendar year. Other categories have different deadlines.
You generally file your corporate tax return and pay any tax due within nine months after the tax period ends. For a company with a financial year ending December 31, 2026, the deadline is September 30, 2027. Taxable persons generally still file when no tax is due. Keep supporting records for seven years after the relevant tax period ends.
Table 3. UAE corporate tax penalties
|
Violation |
Penalty |
Exceptions or notes |
|
Late registration |
AED 10,000 |
Eligible persons can obtain a waiver by filing their first return or applicable annual declaration within seven months after the first period ends. A paid penalty is credited to the tax account when conditions are met. |
|
Late filing |
AED 500 for each month or part-month for the first 12 months; AED 1,000 for each month or part-month thereafter. |
Can apply even when no tax is due. |
|
Late payment |
14% per annum on unpaid tax, applied monthly for each month or part-month. |
Equivalent to 14% divided by 12 per chargeable month, rather than 14% each month. |
The FTA explains the late registration penalty waiver, including the seven-month first-return requirement.
What does UAE corporate tax mean for US citizens and Green Card holders?
The UAE does not impose a general personal income tax on employment income, but US citizens and Green Card holders may still have to file US returns reporting worldwide income. The US and UAE have no comprehensive income tax treaty. UAE corporate tax does not remove these US obligations.
Your US reporting depends first on how the UAE business is classified for US tax purposes. A foreign corporation may trigger Form 5471 based on your ownership or role. Certain filing failures carry penalties starting at US$10,000. A business classified as a foreign disregarded entity or partnership can instead have different reporting requirements. The UAE legal label alone does not decide the US classification.
A foreign corporation generally becomes a controlled foreign corporation (CFC) when more than 50% of its voting power or value is owned by US shareholders, taking attribution rules into account. For this test, a US shareholder generally meets a 10% threshold by voting power or value. CFC rules can tax a US owner’s share of certain income before a distribution.
For relevant tax years beginning after December 31, 2025, net CFC tested income (NCTI) replaces the former Global Intangible Low-Taxed Income (GILTI) calculation. For calendar-year cases, the 2025 return generally remains under the former GILTI rules, while NCTI applies for 2026. Use Form 8992 and the final instructions applicable to the tax year, together with the governing law and effective-date rules.
For eligible US corporate shareholders, the 2026 rules generally permit a deemed-paid foreign tax credit for 90% of qualifying foreign taxes attributable to tested income, subject to limitations. Individuals generally need a Section 962 election to access this indirect credit and calculate it on Form 1118. The credit depends on the income, creditable taxes, US limitations and other adjustments.
Table 4. How UAE tax treatment can affect US CFC taxation
|
UAE corporate tax treatment |
Potential US tax implication |
|
0% under Small Business Relief |
No UAE corporate tax on that income is available for an indirect credit. |
|
0% on qualifying free zone income |
Qualifying income can still fall within the US CFC tax rules |
|
9% on taxable income above AED 375,000 |
Creditable UAE taxes may reduce US tax where the owner qualifies for an indirect credit. |
|
15% domestic minimum top-up tax |
Creditability and interaction with US rules require separate analysis. |
For eligible US corporate shareholders, a 40% Section 250 deduction can produce a 12.6% federal corporate tax rate on NCTI before foreign tax credits and other adjustments. An individual making a Section 962 election may obtain similar treatment for the relevant inclusion. The election also affects later distributions, so its benefit must be assessed over the full ownership and distribution cycle.
A UAE relief that reduces UAE tax to zero can therefore increase the US tax remaining after available credits. Review the combined UAE and US result before choosing relief or making a US election.
UAE company bank accounts may also be reportable on an FBAR if you have a reportable financial interest or signature authority and the aggregate value of all your reportable foreign financial accounts exceeds US$10,000 at any time during the calendar year. Exceptions can apply.
Frequently Asked Questions
Do I have to register if my profit is below AED 375,000?
Generally, yes, if you are a UAE company subject to corporate tax. Low profit or a valid Small Business Relief election does not itself remove registration or filing requirements. Different rules apply to individuals: the initial UAE business-turnover threshold is AED 1 million per calendar year. Registration exemptions and branch rules also need to be considered.
Do freelancers and sole proprietors pay UAE corporate tax?
Individuals generally enter the UAE corporate tax regime when combined turnover from their UAE business activities exceeds AED 1 million in a calendar year. Tax is then calculated on taxable profit using the relevant rules, and eligible resident individuals may elect Small Business Relief. An individual already registered can still need to file a nil return if turnover later falls below AED 1 million. Falling below the threshold alone does not justify deregistration.
How is UAE corporate tax different from VAT?
Corporate tax is charged on taxable profit. The standard bands are 0% and 9%. VAT has a standard rate of 5%, with zero-rated and exempt supplies under separate rules. For UAE-resident businesses, mandatory VAT registration generally applies when taxable supplies and imports exceed AED 375,000 over the previous 12 months, or are expected to exceed it in the next 30 days. Voluntary registration generally starts above AED 187,500 of taxable supplies and imports, or taxable expenses, using the relevant periods.
Can I claim UAE corporate tax as a credit on my US return?
If your UAE company is a separate foreign corporation for US tax purposes, you generally cannot claim the tax it pays directly on your personal Form 1116. For eligible CFC inclusions, an individual generally needs a Section 962 election and Form 1118 to claim a deemed-paid credit. If the business is treated as disregarded or as a partnership for US purposes, different owner-level credit rules may apply. The legal liability for the tax, creditability, timing and US limitations must be checked.
