Take a business with AED 500,000 of taxable income for the year. The first AED 375,000 is taxed at 0%, so only the slice above the threshold is taxable. That slice is AED 500,000 less AED 375,000, which is AED 125,000. Tax is 9% of AED 125,000, which comes to AED 11,250. Because the zero-rate band shelters the first AED 375,000, the effective rate across the whole AED 500,000 is just 2.25%, well below the 9% headline rate. The more income sits above the threshold, the closer the effective rate creeps toward 9%, but it never reaches it.
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How it is calculated
UAE federal corporate tax applies for financial years starting on or after 1 June 2023. There are two rates. The first AED 375,000 of taxable income is taxed at 0%, and taxable income above AED 375,000 is taxed at 9%. The calculation is simply the income above the threshold multiplied by 9%. The effective rate, which is the tax divided by total income, is always below 9% because of the zero-rate band, and it rises gradually as income grows. This tool applies the standard regime only. Free zone persons may qualify for 0% on qualifying income, and small businesses under the AED 3,000,000 revenue cap may elect Small Business Relief, both handled by separate calculators.
Frequently asked questions
How much is corporate tax in the UAE?
UAE federal corporate tax applies for financial years starting on or after 1 June 2023. The first AED 375,000 of taxable income is taxed at 0%, and taxable income above AED 375,000 is taxed at 9%. So a business with AED 500,000 of taxable income pays 9% on AED 125,000, which is AED 11,250. Free zone persons and small businesses may have separate reliefs.
Who must register for UAE corporate tax?
All juridical persons incorporated in the UAE and all foreign juridical persons managed and controlled from the UAE must register with the Federal Tax Authority (FTA). Natural persons conducting business or business activity in the UAE are also subject to corporate tax if their turnover exceeds AED 1,000,000 in a calendar year. Registration must be completed within the deadlines set by the FTA for each category of taxable person.
Do UAE free zone businesses pay corporate tax?
Qualifying free zone persons can benefit from a 0% corporate tax rate on qualifying income, provided they meet the substance requirements, maintain adequate accounts, and do not elect to be subject to the standard rates. Income from domestic transactions with mainland UAE businesses, and certain other income types, are treated as non-qualifying and taxed at 9%. Businesses should review the specific conditions under Ministerial Decision No. 139 of 2023 to confirm their status.
What is Small Business Relief for UAE corporate tax?
Small Business Relief allows UAE resident taxable persons with revenue of AED 3,000,000 or less in a tax period to elect to be treated as having no taxable income, effectively paying no corporate tax for that period. The relief is available for tax periods ending on or before 31 December 2026. Businesses that elect the relief are still required to maintain financial records but are not required to prepare a full tax return in the same way as standard taxable persons.