UAE Corporate Tax for Foreign Business Owners: How It Actually Applies

The UAE introduced a federal corporate tax in June 2023 — its first broad-based corporate income tax, at a headline rate of 9% on taxable income above AED 375,000 a year. For a country known as a low-tax base, that was a real change, and it produced a wave of “0% UAE corporate tax” marketing that mostly compresses a more involved reality.

This article walks through how the rules actually apply to a foreign-owned UAE company: the 9% rate, the AED 375,000 threshold, the free zone 0% regime and the small business relief that runs to the end of 2029. It is an overview to get you oriented; where a point has real depth, we link to the page that covers it properly rather than repeat it here.

None of this is the reason to move a business to the UAE. For the owners we work with, tax is a benefit that follows from getting the business into a market that works — not the thing the structure is built around. Start Business Services works in that order: the business and the bank account first, the corporate-tax route designed in around them. It still has to be understood, so here is the shape of it.

The basic position

UAE corporate tax applies to taxable income earned by UAE-incorporated companies — free zone and mainland alike — by foreign companies effectively managed and controlled in the UAE or with a permanent establishment here, and by individuals running a business in the UAE with turnover above AED 1 million a year.

Source: Cabinet Decision No. 49 of 2023, Article 2(1) (UAE Ministry of Finance): a natural person’s business is within corporate tax “only where the total Turnover derived from such Businesses or Business Activities exceeds AED 1,000,000 … within a Gregorian calendar year”. Salary, personal investment income and income from property investments are outside it.

The standard rate is 9% on taxable income above AED 375,000 per tax year. Income up to AED 375,000 is taxed at 0%. The threshold is per legal entity per tax year, not per shareholder. So a foreign-owned UAE company with, say, AED 1.5 million of taxable profit pays 0% on the first AED 375,000 and 9% on the remaining AED 1,125,000 — AED 101,250 of corporate tax. That is the baseline. A few specific regimes change it.

Source: Federal Decree-Law No. 47 of 2022, Article 3, sets 0% and 9% and leaves the threshold to the Cabinet; Cabinet Decision No. 116 of 2022, Article 2(1), sets that threshold at taxable income “not exceeding 375,000” dirhams, irrespective of how many businesses the taxable person runs.

The free zone 0% regime

The route by which a free zone company can apply 0% corporate tax is the Qualifying Free Zone Person (QFZP) regime. Where the conditions are met, “qualifying income” is taxed at 0% and any non-qualifying income at 9% from the first dirham — a Qualifying Free Zone Person does not get the AED 375,000 band.

This is where the “0% in a free zone” story actually comes from — but it only works for specific income types, with real substance in the free zone, an annual audit, transfer pricing compliance, and non-qualifying revenue kept under a cap (the lower of 5% of total revenue or AED 5 million in the year).

The catch for a lot of relocating owners is what counts as qualifying. The qualifying-activities list covers things like manufacturing, processing of goods, holding of shares, headquarters and treasury services to related parties, and distribution from a designated zone.

Standard professional and consulting services billed to clients outside the free zones are generally not on that list — which means that income is non-qualifying and taxed at 9%, and can even threaten QFZP status if it breaches the cap. So “I’m in a free zone, therefore I’m at 0%” is usually an oversimplification. The full mechanics — the activities list, the de minimis test and the substance conditions — are worked through in Qualifying Free Zone Income Explained.

Source: the qualifying and excluded activity lists, and the small-amounts allowance (the de minimis rule), are set by Ministerial Decision No. 229 of 2025 (Articles 2 and 3), under Cabinet Decision No. 100 of 2023. Audited financial statements are required of every Qualifying Free Zone Person under Ministerial Decision No. 84 of 2025, Article 2(1)(b), with no revenue threshold.

Small Business Relief

For tax periods ending on or before 31 December 2029, a small company can elect for Small Business Relief and be treated as having no taxable income for the year — effectively 0% corporate tax. To qualify, revenue (not profit) must be at or below AED 3 million in that period and in every earlier period from June 2023 onwards. The election is made each year.

Relief is simpler than the free zone route while it lasts: no qualifying-income analysis and less compliance overhead. It is not available to a QFZP claiming the 0% rate on qualifying income — a free zone company chooses between the two — and not available to large multinational groups. Many smaller owner-led businesses elect the relief in their early years and move to the corporate tax position proper as revenue passes AED 3 million. It is currently scheduled to end after 31 December 2029, so it is worth planning for that transition rather than assuming it continues.

Source: Ministerial Decision No. 73 of 2023 (UAE Ministry of Finance), as amended by Ministerial Decision No. 131 of 2026: Article 2(1) sets the revenue threshold at AED 3,000,000. Article 2(2), as replaced by the 2026 amendment, applies it to tax periods from 1 June 2023, and only to tax periods ending on or before 31 December 2029. Article 3(2) says you cannot use the relief if you are a Qualifying Free Zone Person.

What it means by company size

For most relocating owners the position tracks revenue more than anything else:

• Revenue at or below AED 3 million. Small Business Relief gives an effective 0% through 2029. Plan for the relief ending after that.
• Revenue roughly AED 3–10 million. The relief is gone. The choice is the free zone 0% route where the qualifying-income analysis genuinely supports it, or standard 9% on profit above AED 375,000. For a free zone services business with mostly non-qualifying income, 9% is often the honest answer — and if the company is a Qualifying Free Zone Person, that 9% runs from the first dirham, with no AED 375,000 band.
• Revenue above AED 10 million. The free zone analysis becomes a real design question — what is actually conducted from the free zone, and how much of the income qualifies — because the difference between 0% and 9% on a large base is material.
• Mainland, any size. 9% above AED 375,000, with Small Business Relief available at or below AED 3 million through 2029.

Registration and filing

Every UAE company has to register for corporate tax and file an annual return — including a company in its first year before any revenue, a company under the AED 375,000 threshold, and a company electing Small Business Relief. The 0% rate is a tax outcome, not an exemption from filing.

Registration is through the Federal Tax Authority’s EmaraTax portal, and the return is due within nine months of the end of the company’s financial year, with payment due at the same time. There is no quarterly instalment regime. Late registration, late filing and underpayment all carry penalties — late registration alone is AED 10,000 — so this is one of the things worth getting onto a calendar early.

Source: Federal Decree-Law No. 47 of 2022, Article 51 (registration and tax registration number) and Article 53(1), which requires a tax return “no later than (9) nine months from the end of the relevant Tax Period”. Registration and filing run through the Federal Tax Authority’s corporate tax service. The AED 10,000 late-registration penalty is item 14 in the schedule annexed to Cabinet Decision No. 75 of 2023 and its amendments, as amended by Cabinet Decision No. 10 of 2024.

Where tax sits in the decision

For most owners moving a real business to the UAE, corporate tax is one input into the structure, not the thing the structure is built around.

The order that tends to matter is: getting the owner cleanly out of their home tax residence and the company unambiguously UAE-resident; a licence and shareholder structure that produce a working bank account; then the corporate tax route — relief while small, the free zone analysis where it supports it, or standard 9% — designed in rather than retrofitted. An owner who optimises for the lowest tax number alone can end up with a structure that fails on banking or on residence, which costs far more than the tax it saved.

In Start Business Services’ experience, the owners who optimise for the lowest tax number alone are the ones who end up with a structure that fails on banking or residence, which is why the firm designs the tax route in rather than retrofitting it later.

UAE corporate tax is separate from the UK tax position back home. If the board decisions are still taken in the UK — not just the day-to-day work — HMRC can treat a UAE company as UK resident as well.

The 2016 UK–UAE Double Taxation Convention does not settle that on its own: the two tax authorities have to agree which country the company belongs to, and if they cannot agree the company loses most treaty benefits in both. That is a question for a UK adviser, and it is cheaper to ask before the structure is set. The detail is in Management and Control Risks Explained.

Source: the 2016 UK–UAE Double Taxation Convention (GOV.UK), in force 25 December 2016, Article 4(4): where a company is resident in both states the competent authorities “shall endeavour to determine by mutual agreement” which one, and absent agreement it is “not…considered a resident of either Contracting State for the purposes of claiming any benefits” except those in Articles 21, 22 and 23. UK company residence follows central management and control — HMRC INTM120060.

For the full reference on the rate, the regimes and the detail, see UAE Corporate Tax. For how the choice of structure interacts with all this, Dubai Free Zone vs Mainland, and for the residence side, UAE Tax Residency for UK Business Owners.

Common misunderstandings

“I’m in a free zone, so I pay no tax.”

Only qualifying income is at 0%, with the substance, audit and cap conditions met. Plenty of owner-led free zone services businesses do not qualify for some or all of their income. If the company is a Qualifying Free Zone Person, that non-qualifying income is taxed at 9% from the first dirham — it gives up the AED 375,000 band to take the 0%. If it is not a Qualifying Free Zone Person, it sits in the standard system at 9% above AED 375,000, or elects Small Business Relief while revenue is at or below AED 3 million.

“The threshold is AED 375,000 of revenue.”

It is AED 375,000 of taxable income — broadly, profit. A company with AED 2 million of revenue and AED 1.5 million of expenses has AED 500,000 of taxable income: 0% on the first AED 375,000, 9% on the next AED 125,000.

“My free zone company doesn’t need to file.”

Every UAE company, free zone included, registers and files. The 0% outcome does not remove the filing obligation.

Common questions

Do free zone companies pay UAE corporate tax?

Yes. Where the conditions for Qualifying Free Zone Person status are met, qualifying income is at 0% and non-qualifying income at 9%. A free zone company that does not meet the conditions, or elects out, is taxed at 9% above AED 375,000 like any other UAE company.

When did UAE corporate tax start?

It applies for tax periods starting on or after 1 June 2023. For a company on a calendar year, the first period ran 1 January to 31 December 2024, with the first return due by 30 September 2025.

What is Small Business Relief?

An annual election, available for tax periods ending on or before 31 December 2029, that treats a qualifying small business as having no taxable income — effectively 0%. Revenue must be at or below AED 3 million in the period and in every prior period from June 2023. It is not available to a QFZP claiming the 0% rate, or to large multinational groups.

Does UAE corporate tax apply to my personal income?

The UAE has no personal income tax. Corporate tax reaches an individual only where they run a business in the UAE with turnover above AED 1 million a year. Salary as an employee and personal investment income outside a business are not within it.

Do I have to register even if my company makes no profit?

Yes. Registration and an annual return are required regardless of profit. The 0% rate applies to taxable income up to AED 375,000; the filing obligation exists from year one.

Is VAT the same as corporate tax?

No. UAE VAT (5%) is a separate tax with its own AED 375,000 registration threshold on taxable supplies and its own quarterly filing. Both are run by the Federal Tax Authority but they are independent obligations.

This article is general information based on the rules and our experience at the time of writing. Tax requirements change and depend on individual circumstances; nothing here is formal tax or legal advice. If you are unsure how any of it applies to you, take advice from a suitably qualified professional.

Frequently asked questions

How much UAE corporate tax will my company pay?

9% on taxable profit above AED 375,000 and 0% up to that, if it is not a Qualifying Free Zone Person. If it is, 0% on qualifying income and 9% on everything else — with no AED 375,000 band. Many younger companies use Small Business Relief instead while revenue is at or below AED 3 million.

Do I have to register even if I will pay 0%?

Yes. Registration for UAE corporate tax is required for all companies, including free zone companies, and a return is filed within nine months of the financial year end.

Who handles the corporate-tax side when I set up my company?

Not the advice itself — that sits with the UK and UAE tax advisers we work with. What Start Business Services handles in-house is the compliance and the order it happens in: corporate tax registration, the Qualifying Free Zone Person assessment, the Small Business Relief election where it applies, the returns and the bookkeeping behind them — set up alongside the licence, shareholders and bank account rather than bolted on afterwards.

Gareth Jones — Founder, Start Business Services

Gareth works directly with UK, Irish and Australian owners setting up and banking in the UAE. More about Gareth →