Who this is for
Designed for serious founders. Best suited for established entrepreneurs and high-net-worth individuals seeking long-term compliant structures. Not every business model is suitable for the UAE — we work with founders building defensible, sustainable, cross-border operations rather than short-term setups.
As of May 2026.
A clearer picture than the social-media version
If you have spent any time on LinkedIn or YouTube researching the UAE, you will have come across the same shorthand: move to Dubai, set up a free zone company, pay zero tax. It is the opening line of a thousand relocation pitches, and it has not been accurate for some time.
The UAE introduced a federal corporate tax regime under Federal Decree-Law No. 47 of 2022, with the rules taking effect for financial years beginning on or after 1 June 2023. The headline rate is 9 percent on taxable income above AED 375,000, alongside a continued 0 percent regime for what the legislation calls a Qualifying Free Zone Person, where conditions are met. From 1 January 2025, the UAE also implemented a Domestic Minimum Top-up Tax aligned with the OECD’s Pillar Two framework, which raises the effective rate to 15 percent for in-scope multinational groups with consolidated revenue above EUR 750 million. As of May 2026, this is the regime founders are walking into.
None of this makes the UAE a high-tax jurisdiction. Compared with the United Kingdom’s 25 percent main corporation tax rate, Australia’s 30 percent, or Ireland’s 12.5 percent, the UAE remains structurally favourable for many founders. The point is that the simple zero-percent framing no longer matches the rules on the page. Founders considering UAE structures need to understand which slice of their activity falls under the 9 percent rate, which can sit inside the free zone 0 percent regime, and what the substance, registration, and filing obligations look like in practice.
What follows is the working picture as of May 2026, written for UK, Australian, and European founders who want the actual position rather than the marketing version. Where a number, threshold, or rule is cited, it carries a date qualifier. The disclaimer at the end of this guide applies in full.
The headline rule: 9 percent above AED 375,000
Federal Decree-Law No. 47 of 2022 introduced corporate tax across the UAE for financial years beginning on or after 1 June 2023. The structure is straightforward in outline. Taxable income up to AED 375,000 is taxed at 0 percent. Taxable income above AED 375,000 is taxed at 9 percent. There is no progressive band system above that threshold; the 9 percent rate applies to the full slice of taxable income over AED 375,000, in line with guidance from the Federal Tax Authority and the Ministry of Finance.
The regime applies to Taxable Persons as defined in the Decree-Law, which includes UAE-incorporated companies (mainland and free zone), foreign companies effectively managed and controlled in the UAE, and individuals carrying on a business or business activity above a turnover threshold (currently AED 1,000,000 in a Gregorian calendar year, as of May 2026, per Cabinet Decision No. 49 of 2023). Most foreign founders running a UAE entity should assume their company is a Taxable Person and plan accordingly.
Practically, this changes the work foreign-owned entities have to do. Every Taxable Person must register with the Federal Tax Authority for corporate tax and obtain a Tax Registration Number, file an annual corporate tax return within nine months of the financial year end, and maintain books and records that support the return for at least seven years. Audited financial statements are required for businesses meeting certain revenue thresholds and for all Qualifying Free Zone Persons under Ministerial Decision No. 84 of 2025 (covering audited financial statement requirements, as of May 2026). Penalties for late registration, late filing, and inadequate records are set out in Cabinet Decisions issued by the Ministry of Finance.
The 9 percent rate is, by design, low by international standards. The work has shifted from “do I owe tax” to “have I registered, am I filing on time, and are my records defensible if the FTA asks”. Shiraz Khan, Head of Taxation at Al Tamimi & Company, has noted across multiple 2024 and 2025 client briefings that the operational burden of the regime — registration, transfer pricing documentation where applicable, and audit-ready bookkeeping — is the part most foreign founders underestimate.
The free zone exception — Qualifying Free Zone Person status
The continued 0 percent regime for free zone businesses survives the corporate tax law, but only on terms. The Decree-Law creates a category called the Qualifying Free Zone Person, or QFZP. A QFZP pays 0 percent corporate tax on its Qualifying Income and 9 percent on income that does not qualify. The detail of what qualifies sits in Cabinet Decision No. 100 of 2023 and Ministerial Decision No. 265 of 2023, both addressing Qualifying Income and Qualifying Activities (as of May 2026).
To be a QFZP, an entity must meet several conditions in combination. It must be a juridical person incorporated in a UAE free zone. It must maintain adequate substance in the free zone — meaning real people, real premises, and real operating expenditure tied to the relevant activity. In our own work we consult our bank compliance team before activities are picked, because the trade licence and the banking story have to align with substance from day one. Banks are increasingly checking the same things tax authorities check — real activity, real management, real presence — and an entity that cannot satisfy a bank’s ongoing review will rarely satisfy a substance review either. It must derive Qualifying Income, which broadly covers transactions with other free zone persons (where the free zone person is the beneficial recipient), plus a defined list of Qualifying Activities including manufacturing, processing, holding of shares and other securities, ownership and operation of ships, fund and wealth management services regulated by a UAE competent authority, headquarter services to related parties, treasury and financing services to related parties, and certain logistics activities. It must comply with transfer pricing rules and prepare transfer pricing documentation where thresholds are met. It must not have elected to be subject to standard corporate tax. And it must satisfy the de minimis requirement: non-qualifying revenue must not exceed the lower of 5 percent of total revenue or AED 5 million in a tax period (as of May 2026).
Several activities are explicitly excluded from Qualifying Activities. Banking and insurance other than reinsurance, finance and leasing other than to related parties or in defined treasury contexts, transactions with natural persons other than for specific qualifying activities, and ownership or exploitation of UAE-located immovable property other than commercial property used in qualifying activities are all carved out. Crucially, income from activities involving a UAE mainland customer that does not fall under a permitted carve-out is generally non-qualifying — and large amounts of mainland-facing revenue can put QFZP status at risk through the de minimis test.
PwC Middle East tax alerts published through 2024 and 2025, including commentary by Jeanine Daou and other PwC UAE partners, have repeatedly flagged the same practical issue: founders set up in a free zone assuming the 0 percent rate will apply automatically, then find that a meaningful share of their revenue is mainland-facing, regulated services to natural persons, or otherwise non-qualifying. KPMG Lower Gulf and Deloitte Middle East have published in similar terms. The pattern is consistent. QFZP status is available, often valuable, and not automatic.
Pillar Two and the Domestic Minimum Top-up Tax for large groups
A second layer of the UAE regime applies only to large multinational groups. From 1 January 2025, the UAE implemented a Domestic Minimum Top-up Tax, or DMTT, aligned with the OECD’s Pillar Two Global Anti-Base Erosion (GloBE) rules. The DMTT was introduced via Cabinet Decision No. 142 of 2024 (as of May 2026, per Ministry of Finance announcements in late 2024).
The DMTT applies to groups with consolidated annual revenue of EUR 750 million or more in at least two of the four preceding financial years — the same threshold the OECD uses to identify in-scope multinational enterprises. Where an in-scope group’s effective tax rate in the UAE falls below 15 percent, a top-up tax brings the UAE-sourced effective rate up to 15 percent. In practical terms, a QFZP within a EUR 750 million-plus group cannot rely on the 0 percent rate to deliver a 0 percent outcome at group level: the top-up will apply.
For most foreign founders this is genuinely not relevant. The threshold is specifically designed to capture large multinationals — the Apples, Unilevers, and HSBCs of the world — and intentionally leaves the great majority of internationally active SMEs and family businesses outside its scope. EY Tax Alerts and Deloitte Middle East commentary through 2024 and 2025 have been consistent that for owner-managed businesses well below the EUR 750 million revenue line, the DMTT is a watching brief rather than an active planning concern. Where it does start to matter is for clients who are subsidiaries of large parent groups, or for founders building toward a scale where the group threshold could be crossed within a planning horizon.
What the UAE still does not tax
The corporate tax regime is narrower than the headlines sometimes suggest. As of May 2026, the UAE continues not to impose the following:
- Personal income tax on salaries, wages, or employment income for UAE residents.
- Capital gains tax on individuals — gains realised by a natural person on the sale of shares, property, or other assets in a personal capacity are not subject to UAE income tax.
- Withholding tax on dividends, interest, or royalties paid by UAE entities to non-resident recipients (the rate is currently 0 percent under Article 45 of Federal Decree-Law No. 47 of 2022, as of May 2026).
- Inheritance tax or estate tax at federal level. Succession of UAE-situated assets is governed by personal status law and, where applicable, registered wills under DIFC, ADGM, or Abu Dhabi Judicial Department frameworks.
- A general goods-and-services-style tax on most local commerce beyond the existing 5 percent VAT regime, which has its own exemptions and zero-rated categories under Federal Decree-Law No. 8 of 2017.
There are sector-specific regimes that sit outside the standard 9 percent rate. Income from the extraction of natural resources — oil and gas — is taxed under Emirate-level regimes at significantly higher rates, with Dubai applying 50 percent to oil and gas extraction activity under long-standing Emirate-level legislation (as of May 2026). Foreign bank branches in Dubai are taxed at 20 percent on their Dubai-source taxable income under Dubai Law No. 1 of 2024, replacing the older Regulation of 1996; the 20 percent figure is reduced by any 9 percent federal corporate tax already paid on the same income, so the rule operates as a top-up for that specific category. Most foreign founders will not encounter either regime, but they are part of the picture.
What this means in practice for our typical client
Most of the foreign founders we work with — UK, Australian, European entrepreneurs setting up trading, advisory, holding, or services businesses in the UAE — sit inside the standard regime, often with QFZP eligibility on the table. The practical implications cluster into a small number of decisions.
First, structure the entity for QFZP eligibility from day one if the activity supports it. This means choosing a free zone whose permitted activities map cleanly onto the Qualifying Activities list, ensuring the licence and the operating reality match (substance is checked against actual operations, not the licence wording), and being deliberate about who the customers are. The free zone choice is a banking-and-tax decision, not just a tax one. For cross-border trading clients we typically recommend IFZA in Dubai Silicon Oasis because it is inside Dubai — banking-friendly and aligned with international compliance standards. Northern emirate freezones can be cheaper, but historically have carried banking reputation issues that affect both account opening and ongoing compliance reviews; an entity that struggles to hold a bank account also struggles to evidence the substance the corporate tax regime expects. A holding company managing intra-group equity stakes, a manufacturing operation in a free zone, a regulated fund manager, or a regional headquarters servicing group entities are all natural fits. A consulting firm whose clients are predominantly UAE mainland businesses or natural persons is generally not a fit, even when set up in a free zone.
Second, register and file. Every Taxable Person must register with the Federal Tax Authority for corporate tax purposes within the timelines published by the FTA, file an annual return within nine months of the financial year end, and meet the audited-accounts requirement where it applies. Late registration, late filing, and late payment all carry administrative penalties under Cabinet Decisions issued by the Ministry of Finance. Bookkeeping that previously sat at “good enough for the bank” needs to be at “defensible to the FTA” — the difference is real and we work with clients on it.
Third, get the transfer pricing position right. Transfer pricing rules apply to transactions between Related Parties and Connected Persons, including transactions between a UAE entity and its foreign parent or sister companies. Documentation thresholds are set out in Ministerial Decision No. 97 of 2023 (as of May 2026). For most owner-managed groups, the immediate obligation is a defensible methodology and contemporaneous documentation; for larger groups, full Master File and Local File documentation will apply.
Fourth, watch the line above your business. If you are part of a group, or if your business is on a trajectory where group revenue may exceed EUR 750 million within the planning horizon, the DMTT becomes relevant and the structure needs to anticipate it.
Our team has been advising on UAE structures since 2009. That is 17 years of legal-grounded experience covering pre-tax, the introduction of VAT in 2018, the introduction of corporate tax in 2023, and now Pillar Two implementation. The work has changed; the principles have not. Get the structure right at the start, document the substance, register and file on time, and the regime is workable. Corporate tax registration, small business relief filings, accounting, and yearly audits are handled in-house alongside the banking and substance work — the same team carries the file from incorporation through to annual compliance, which is how the structure stays consistent with what the bank and the FTA each expect to see. The mistakes we see most often are made before incorporation, not after.
Working with us on this
If you are weighing a UAE structure and want a measured read on how the corporate tax regime applies to your specific business — activity mix, customer base, group profile, and where the QFZP boundary actually sits for you — we are happy to walk through it. The first conversation is free of charge and free of pressure. From there, if there is a fit, we scope the work in writing and you decide whether to proceed.
Next step: book a 30-minute call via the contact form on this site, or message us on WhatsApp. We will read what you send us before the call.
Frequently asked questions
What is the UAE corporate tax rate in 2026?
The UAE introduced corporate tax in 2023. The headline rate is 9%, charged on company profits above AED 375,000 (around £80,000 / US$100,000). Profits up to that threshold are taxed at 0%. The same rules apply to mainland companies, freezone companies, and to UAE companies owned by foreign founders — there is no separate rate for foreign owners. A separate 0% regime applies to certain freezone companies meeting strict conditions, covered in the next questions.
Who has to pay UAE corporate tax, and when?
Any company with its centre of operations in the UAE has to pay — that includes both mainland and freezone companies, no matter who owns them. Companies based outside the UAE only pay if they have a real operating presence in the UAE (an office, staff, or similar). Self-employed individuals running a business have to pay too, but only if their business income is over AED 1 million per year (around £215,000 / US$272,000). A small list of organisations is exempt — government bodies, registered charities, pension funds, and certain investment funds. Payment is due once a year, nine months after the end of your company’s financial year. So a company with a financial year ending 31 December 2025 has to pay by 30 September 2026. There are no instalments or quarterly payments — it’s a single annual filing and a single payment.
Can my freezone company pay 0% UAE corporate tax?
Possibly — but only if it meets every one of these conditions in the same year: its income comes from the right types of activity (covered in the next question); it has real substance in the UAE — a real office, real staff, real activity, not just a shell registration; it follows the UAE’s transfer pricing rules (rules about how related companies price transactions with each other); it has audited financial statements; and it hasn’t elected to opt out into the standard 9% rate. Miss any one of these in a year, and the company loses the 0% status for that year and is locked out for the next four. The label for a company that qualifies is Qualifying Free Zone Person, usually shortened to QFZP.
What income qualifies for the freezone 0% rate?
For a freezone company, the 0% rate only applies to certain types of income. Broadly, qualifying income includes income from doing business with other freezone companies, income from qualifying activities with customers outside the UAE, and income from holding shares and bonds. Income that does not qualify includes anything earned from selling to mainland UAE customers, income from owning UAE real estate that rents to others, and several other categories — that income is taxed at the normal 9% rate. The line between qualifying and non-qualifying income is detailed, and the UAE Federal Tax Authority has issued multiple clarifications through 2024 and 2025 that practitioners are still working through case by case.
Does the new global minimum tax apply to my UAE company?
This is about Pillar Two — a global rule agreed by the OECD that says any group of companies with combined annual revenue above EUR 750 million has to pay an effective tax rate of at least 15% in every country it operates. The UAE has put this into local law from 1 January 2025 via something called the Domestic Minimum Top-up Tax. For most owner-operated UAE companies, the EUR 750 million threshold is far above their revenue, so Pillar Two doesn’t apply — it’s only relevant for very large multinational groups with UAE operations. Importantly, the freezone 0% rate doesn’t help against Pillar Two; those large groups have to pay the 15% top-up regardless.
What does “substance” mean for a freezone company?
To keep the freezone 0% rate, a company has to be a real operating business — not a paper company. That means a real physical office in the freezone (not a shared ‘flexi desk’ used by hundreds of companies); real employees with relevant experience; and real operating spending in proportion to the activity. The ‘shared desk and nominee staff’ model that some setup providers used to offer doesn’t satisfy the substance test under the current corporate tax rules. The company also has to file audited financial statements every year.
What is the small business relief and do I qualify?
Small business relief is a transitional regime that lets eligible UAE companies elect to be treated as having no taxable income for a financial year, provided their revenue in that year and all previous tax years is at or below AED 3 million (around £640,000 / US$815,000). It applies for tax periods ending on or before 31 December 2026. The election has to be made on the corporate tax return; it isn’t automatic. It’s helpful for early-stage UAE companies, but the AED 3 million ceiling is total revenue, not profit — many trading businesses cross it quickly. It also doesn’t apply to Qualifying Free Zone Persons (those are already at 0% on qualifying income) or to members of multinational groups subject to Pillar Two.
Do I also need to register for VAT?
VAT is separate from corporate tax. UAE VAT is charged at 5% and applies to most goods and services. A business has to register for VAT once its annual taxable supplies exceed AED 375,000 (the mandatory registration threshold), and can voluntarily register from AED 187,500. VAT registration is done through the Federal Tax Authority’s EmaraTax portal — the same portal as corporate tax. If your company is registered for both, the same login covers both filings. Many companies that are below the corporate tax threshold are still above the VAT threshold (or vice versa) — they’re independent decisions based on different numbers.
What records do I need to keep for UAE corporate tax?
UAE corporate tax law requires you to keep records that support every figure on the return — invoices, contracts, bank statements, payroll records, expense receipts, transfer pricing documentation if applicable, and the underlying accounts. Records must be kept for at least seven years after the end of the relevant tax period. Records can be kept electronically, but they have to be accessible in a form the Federal Tax Authority can audit. Practical implication: you need a bookkeeping system in place from day one — corporate tax is not the time to discover your records aren’t audit-ready.
Do I need audited financial statements for my UAE company?
It depends on the company. Audited financial statements are mandatory for any Qualifying Free Zone Person claiming the 0% rate. They’re also mandatory for all mainland LLCs above certain size thresholds, and for many freezone companies under their respective freezone authority’s rules (rules vary by freezone — IFZA, DMCC, DIFC and others each have their own thresholds). For corporate tax purposes specifically, audited statements are required where the company is claiming QFZP status; otherwise, the law allows accounting standards-compliant statements (which may or may not need an audit depending on the freezone or activity). Most operating businesses end up needing them.
What happens if I file my UAE corporate tax return late or not at all?
Late filing carries an administrative penalty of AED 500 per month for the first 12 months, then AED 1,000 per month thereafter, capped at a percentage of the tax due. Late payment carries a separate penalty plus monthly interest on the unpaid amount. Repeated non-compliance can lead to deregistration from the FTA, which then makes operating any UAE company in your name very difficult. The penalties scale fast and the FTA enforces them — this is not a regime where deadlines can be quietly missed.
Can I offset losses against my UAE corporate tax?
Yes — UAE corporate tax law allows tax losses to be carried forward indefinitely and used to offset taxable income in future years, subject to two main restrictions. First, the company must remain at least 50% owned by the same shareholders from the year the loss arose to the year it’s used. Second, the offset is limited to 75% of the taxable income in the year of use (so you can never reduce taxable income below 25% of its pre-loss level using prior-year losses). There are additional rules for tax groups and for companies with changes of business activity.
How do transfer pricing rules apply to a small UAE company?
Transfer pricing rules apply to transactions between related parties — for example, your UAE company paying management fees to a UK holding company you also own, or selling to a related entity at below-market prices. The UAE has adopted the OECD’s arm’s length principle: related-party transactions must be priced as if they were between independent companies. For most owner-operated UAE companies the documentation requirements are lighter than for large multinationals, but the principle still applies — and the FTA has been increasingly active in reviewing related-party transactions during corporate tax audits. If your structure involves related entities across borders, transfer pricing should be planned in, not bolted on later.
Does the Domestic Minimum Top-up Tax (DMTT) affect me?
Almost certainly not, unless your group is extremely large. The DMTT is the UAE’s local implementation of the OECD Pillar Two global minimum tax. It applies only to multinational groups with consolidated annual revenue of EUR 750 million or more for at least two of the four preceding financial years. For boutique founder-owned UAE companies — even sizeable ones — the threshold is so far above their group revenue that the DMTT is not in scope. If you’re part of a large international group that already files Country-by-Country Reports, then it likely is in scope and your group’s tax team will be on top of it.
How do I get a UAE Tax Residency Certificate for my company?
A Tax Residency Certificate (TRC) is a formal document issued by the Federal Tax Authority confirming that your company is tax-resident in the UAE. It’s used mainly to claim treaty benefits in foreign countries (for example, to avoid being taxed twice on cross-border dividends or interest). To qualify, your company has to have been incorporated in the UAE for at least 12 months, hold a valid trade licence, have audited financial statements, hold a real UAE bank account, and demonstrate that management and control of the company is exercised from the UAE. The application is made through EmaraTax. Processing takes 4 to 6 weeks. The TRC is valid for the financial year stated and has to be renewed annually if you continue to need it.
This guide is intended for general informational purposes only and is based on regulations, policies, and practical experience at the time of writing. While we aim to keep all information accurate and up to date, business, banking, tax, and compliance requirements can change and may differ depending on individual circumstances.
Nothing contained in this guide should be considered formal legal or financial advice. If you are unsure how any information may apply to your situation, we recommend seeking advice from a suitably qualified professional.