Key Takeaways
- The UAE introduced a federal corporate tax on 1 June 2023; businesses must register once they exceed the taxable income threshold.
- The standard tax rate is 9% on profits above AED 375,000; the first AED 375,000 is taxed at 0% and small‑business relief is available.
- Tax returns are generally due nine months after the end of the accounting period; first‑time filers have 15 months; the standard deadline for calendar year entities is 30 September of the following year.
- Registration must occur within three months of becoming liable; failure to register or file can result in penalties starting at AED 10,000 plus 5% per month of overdue tax and possible licence suspension.
- Certain free‑zone entities may continue to benefit from a 0% rate if they meet qualifying criteria.
Introduction
The UAE’s federal corporate tax regime has marked a historic shift for businesses operating in the Emirates. After decades of enjoying zero corporate tax outside the oil and banking sectors, most companies must now factor tax compliance into their operations. While the headline rate remains low compared with global standards, the rules are detailed and the penalties for non‑compliance can be significant. This article explains who needs to register, key deadlines and the steps involved in filing corporate tax returns.
Who is subject to UAE corporate tax?
All UAE‑incorporated companies and branches of foreign companies are subject to corporate tax on profits generated from activities conducted in the UAE. Free‑zone companies can continue to benefit from a 0% rate if they qualify as a “free‑zone person”, which generally requires maintaining adequate substance, deriving qualifying income and meeting other criteria. Individuals conducting business activities under a commercial licence (for example, freelancers or sole establishments) are also subject to corporate tax if their annual turnover exceeds AED 375,000. Passive income such as wages, personal investments and real‑estate income earned in a personal capacity remains exempt.
Rates and reliefs
The standard corporate tax rate is 9% on taxable profits above AED 375,000, with profits up to that threshold taxed at 0%. This effectively shelters small businesses and start‑ups. An optional “small business relief” enables eligible businesses with revenues under AED 3 million to apply a simplified calculation and benefit from a 0% rate for tax periods ending before 31 December 2026. Certain types of income, such as dividends received from UAE or foreign subsidiaries and capital gains from the sale of shares, are exempt if participation conditions are met. Free‑zone companies engaged in qualifying activities may continue to enjoy 0% tax on their qualifying income but must pay 9% on income that does not qualify.
Registration and compliance deadlines
Businesses must register for corporate tax within three months of meeting the income threshold. The Federal Tax Authority (FTA) has released a staggered registration schedule based on licence issuance dates; companies are assigned specific windows to submit their applications. Once registered, taxpayers receive a corporate tax registration number.
Tax returns must be filed electronically within nine months of the end of the financial year. For businesses following a calendar year, the deadline is typically 30 September of the following year (for example, the first tax period for 1 January–31 December 2024 must be filed by 30 September 2025). Entities with non‑calendar financial years must file nine months after the year end. Newly formed companies enjoy an extended 15‑month period for their first return. Estimated tax payments are not currently required.
Penalties for late registration or filing are substantial: a fixed penalty of AED 10,000 applies for late registration, and late filing attracts penalties starting at AED 500 per month, escalating over time. Unpaid tax is subject to monthly penalties of 5% of the owed amount. Persistent non‑compliance can lead to suspension of trade licences.
Step‑by‑step guide to compliance
- Assess whether you need to register. Review your turnover and activities to determine if you exceed the AED 375,000 threshold or if you are a free‑zone entity that must register regardless.
- Prepare documentation. Gather trade licences, articles of association, financial statements, passport copies of owners and any records relevant to your business activities. Appoint an accounting professional if you do not already have one.
- Apply for corporate tax registration. Log in to the EmaraTax portal using your existing FTA credentials or create a new account. Complete the online application, attach the required documents and submit within your allocated registration window.
- Maintain proper accounting records. Companies must prepare financial statements in accordance with International Financial Reporting Standards (IFRS) and keep records for at least seven years. You may need to adjust accounting policies to align with tax rules, such as recognising tax depreciation rates.
- Calculate taxable income. Start with accounting profits and make adjustments for exempt income, non‑deductible expenses, temporary differences and any tax incentives. Utilise small business relief if eligible.
- Submit the tax return and pay tax. File the return via EmaraTax within nine months of the financial year end. Payment must be made at the same time. Monitor FTA updates on approved payment methods.
- Consider appointing a tax agent. If you are unfamiliar with local tax laws or have complex operations, engaging a registered tax agent can help ensure compliance and reduce the risk of penalties.
FAQs
Do freelancers need to register?
Freelancers and sole establishments with an annual turnover above AED 375,000 must register and pay corporate tax on profits. Those below the threshold are exempt.
What expenses are deductible?
Reasonable business expenses that are wholly and exclusively incurred for the business are deductible, including salaries, rent, utilities and marketing. However, fines, bribes and dividends are not deductible.
Are foreign companies taxed on UAE income?
Yes. Foreign companies with a permanent establishment or deriving income from the UAE must pay tax on profits attributable to UAE operations.
Can losses be carried forward?
Tax losses can be carried forward and offset against future taxable income, subject to continuity of ownership and business.
How we support you
Through our Private Office Hub, we connect clients with experienced, English-speaking tax advisers and accountants who understand the specific needs of international and UAE-based businesses.
You’ll receive:
- Guidance on whether you need to register for UAE Corporate Tax
- Expert calculation of your tax liability and filing support
- Assessment of eligibility for the 0% Free Zone tax rate
- Advice on IFRS-compliant record keeping and available reliefs
- Insights on restructuring for tax efficiency
- Ongoing updates on regulatory changes and cross-border implications
Let us help simplify your compliance—so you can focus on growth.
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