How the UAE 9 per cent corporate tax rate actually works
The UAE's headline number is 9 per cent. Almost every summary stops there, and almost every business owner who reads one ends up with the wrong figure in their forecast — because the rate is a band, not a flat charge, and because the base it applies to is not your revenue and not quite your accounting profit either.
This guide sets out the bands, the base, what gets added back, the effective rate at different profit levels, and where the exceptions bite.
The bands
Article 3 of Federal Decree-Law No. 47 of 2022 imposes corporate tax at 9 per cent on taxable income above a threshold, and leaves the threshold itself to the Cabinet. Cabinet Decision No. 116 of 2022 set it at AED 375,000. That split explains why the rate and the band can move independently, and it is why you should check the Cabinet Decision rather than the Decree-Law when you want to confirm the current figure.
One consequence is routinely missed. Cabinet Decision No. 116 gives a taxable person a single AED 375,000 band even where they run several businesses. Splitting one business across two entities to claim the band twice is treated as an arrangement to obtain a corporate tax advantage under Clause 1 of Article 50, the general anti-abuse rule, and the FTA weighs whether the separation had a genuine commercial purpose and whether the same activity carries on substantially unchanged.
| Taxable income | Rate | Tax at the top of the band |
|---|---|---|
| AED 0 – 375,000 | 0% | AED 0 |
| Above AED 375,000 | 9% | — |
Two further rates exist alongside these. A Qualifying Free Zone Person is taxed at 0 per cent on qualifying income and 9 per cent on everything else. And large multinational groups above the global revenue threshold face a 15 per cent Domestic Minimum Top-up Tax, which is a separate regime layered on top rather than a different band.
What you actually pay
Because the first AED 375,000 is free, the effective rate is always below 9 per cent and rises slowly toward it.
| Taxable income | Amount taxed at 9% | Tax due | Effective rate |
|---|---|---|---|
| AED 300,000 | — | AED 0 | 0% |
| AED 400,000 | AED 25,000 | AED 2,250 | 0.6% |
| AED 500,000 | AED 125,000 | AED 11,250 | 2.3% |
| AED 750,000 | AED 375,000 | AED 33,750 | 4.5% |
| AED 1,000,000 | AED 625,000 | AED 56,250 | 5.6% |
| AED 2,000,000 | AED 1,625,000 | AED 146,250 | 7.3% |
| AED 5,000,000 | AED 4,625,000 | AED 416,250 | 8.3% |
| AED 10,000,000 | AED 9,625,000 | AED 866,250 | 8.7% |
Read the last column before you conclude the regime is expensive. A company earning AED 1 million of taxable income hands over 5.6 per cent of it.
The base: from revenue to taxable income
Corporate tax is not charged on revenue and not charged on accounting profit. It is charged on taxable income, which starts at accounting profit and is then adjusted.
Two of those lines cause most of the surprises. Related-party charges — a management fee to an offshore parent, a licence fee to an owner's other company, an above-market rent to a shareholder — must stand up at arm's length or the excess is added straight back. And owner remuneration is only deductible where it is genuinely for services rendered at a commercial level; a salary set purely to clear the AED 375,000 band is exactly what the arm's-length rule exists to catch.
A worked example
What falls outside corporate tax entirely
- Employment income. Salaries are not taxed. There is no personal income tax in the UAE.
- Personal investment income and personally held real estate, where held in a personal capacity rather than through a business.
- A natural person's business turnover below AED 1 million in a calendar year — below that, an individual is not a taxable person for these purposes.
- Government entities, extractive businesses and qualifying public benefit entities, each under its own exemption.
The line that matters for freelancers and consultants is the AED 1 million turnover test. It is measured on gross turnover, not profit. Someone billing AED 1.2 million and spending AED 1.1 million is inside the regime despite earning AED 100,000.
Chartered Advisory reviews the accounting profit, identifies the add-backs before they become an assessment, and prepares the corporate tax computation and return.
Avail our UAE corporate tax servicesFree zone: the 0 per cent is conditional
A free zone company does not get 0 per cent for being in a free zone. It gets 0 per cent on qualifying income if it meets every condition of the Qualifying Free Zone Person regime — adequate substance, qualifying activities, the de minimis test on non-qualifying revenue, audited financial statements and transfer pricing compliance.
Fail one condition and the entity is taxed at 9 per cent as an ordinary taxable person, generally for the year in question and a run of following years. And a QFZP taxed on non-qualifying income does not get the AED 375,000 band on that income — a detail that materially changes free zone modelling. The full conditions are in our guide to qualifying free zone income.
The relief that is about to disappear
Small Business Relief lets a resident business with revenue at or below AED 3 million elect to be treated as having no taxable income. It has kept a large number of UAE SMEs at zero since the regime began — and it is currently available only for tax periods ending on or before 31 December 2026.
Unless it is extended, a calendar-year business that has been electing relief moves to the ordinary 9 per cent computation from the period beginning 1 January 2027, with its first real tax bill falling due nine months after that period ends. If your books have been light because the relief made them feel optional, that is the deadline to work back from. See Small Business Relief and its sunset.
The mistakes that cost the most
- Reading 9 per cent as a flat rate and over-providing by a factor of ten at low profits.
- Forecasting tax on revenue rather than on adjusted taxable income.
- Assuming a free zone licence means 0 per cent. It means 0 per cent if you qualify, and the conditions are testable.
- Ignoring add-backs until the return is being prepared, when nothing can be restructured.
- Paying an unsupported management fee to a related party and treating it as deductible.
- Assuming no tax means no filing. Registration and filing are obligations in their own right, regardless of the rate.
Sources
This guide is written against the official and clearly labelled professional references below. Rates, thresholds and portal procedures change between reviews, so open the primary source before relying on a figure.
Questions people also ask
Is the 9 per cent charged on all my profit once I cross AED 375,000?
No. The threshold is a band, not a cliff. Taxable income up to AED 375,000 is taxed at zero and only the excess is taxed at 9 per cent. A business with AED 400,000 of taxable income pays AED 2,250, not AED 36,000. The effective rate stays below 9 per cent at every level of profit and only approaches it as income grows large.
Is corporate tax charged on revenue or on profit?
On taxable income, which is neither. It starts at accounting profit under IFRS and is then adjusted — disallowed entertainment, fines, above-arm's-length related-party charges and excess interest are added back, while exempt income and brought-forward losses come off. Revenue never enters the computation directly, although it does decide eligibility for reliefs and for registration.
I am a freelancer. Am I inside corporate tax at all?
It depends on gross turnover, not on what you keep. A natural person conducting business in the UAE becomes a taxable person once turnover exceeds AED 1 million in a calendar year. Someone billing AED 1.2 million against AED 1.1 million of costs is inside the regime on AED 100,000 of profit, and must register.
Does my free zone licence mean I pay nothing?
Only if you meet every Qualifying Free Zone Person condition — adequate substance, qualifying activities, the de minimis limit on non-qualifying revenue, audited accounts and transfer pricing compliance. Fail one and you are taxed as an ordinary person at 9 per cent, and a QFZP does not get the AED 375,000 band on its non-qualifying income.
Can I pay myself a salary to reduce taxable income?
Owner remuneration is deductible only where it is genuinely for services rendered and set at a commercial level. A salary calibrated to bring taxable income under AED 375,000 rather than to reflect the work done is precisely what the arm's-length rule is designed to catch, and the excess is added back.
Send the tax year and the transaction or filing involved, and we will tell you what is actually required.
Talk to Chartered Advisory Open the tax calculators