The introduction of Corporate Tax in the United Arab Emirates marks a significant milestone in the country’s transition toward a more diversified economy and a globally recognized tax jurisdiction. Starting from June 1, 2023, businesses operating in the UAE are required to comply with a tiered tax structure, primarily involving 0% and 9% slab rates, with potential additional considerations under global tax frameworks.
This detailed blog explores the different Corporate Tax slab rates applicable in the UAE, explaining their thresholds, applicability, exceptions, and how businesses can remain compliant while optimizing their tax liability.
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Overview of UAE Corporate Tax Regime
The Corporate Tax regime in the UAE was introduced under Federal Decree-Law No. 47 of 2022. It applies to both mainland and Free Zone entities, with exceptions and reliefs provided for certain sectors and qualifying businesses. Corporate Tax is charged on the net profit (taxable income) of the business after allowable deductions.
The law is based on a globally recognized taxation framework and is aligned with the OECD’s Base Erosion and Profit Shifting (BEPS) initiative.
0% Corporate Tax Rate
The 0% tax rate applies to two main scenarios:
1. Small Business Relief
For taxable income up to AED 375,000, a business is not subject to Corporate Tax. This threshold is designed to support startups and small enterprises.
2. Qualifying Free Zone Income
Free Zone entities that meet the requirements of a “Qualifying Free Zone Person” can continue to enjoy a 0% Corporate Tax rate on qualifying income. This may include income from transactions with other Free Zone entities, exports, and certain specified activities.
However, income derived from the UAE mainland or non-qualifying activities may be taxed at 9%.
Note: Entities must ensure substance requirements and maintain adequate documentation to prove their qualification status.
Not sure if your business qualifies for the 0% tax rate? PEAK Business Consultancy Services can evaluate your status and help ensure compliance with Free Zone tax rules.
9% Corporate Tax Rate
The 9% standard Corporate Tax rate applies to taxable income above AED 375,000 for businesses not qualifying for any exemption. It is charged on net income after permissible deductions such as salaries, rent, depreciation, and interest (within specified limits).
This 9% slab rate applies to:
- Mainland companies
- Free Zone entities earning non-qualifying income
- Foreign entities operating in the UAE through a permanent establishment
- Certain natural persons conducting business activities with income exceeding AED 1 million
This rate is among the most competitive globally and is designed to maintain the UAE’s attractiveness as a business hub while adhering to international tax transparency standards.
Beyond 9%: OECD Global Minimum Tax (Pillar Two)
Under the OECD’s Pillar Two rules, multinational groups with consolidated global revenues of EUR 750 million or more are subject to a global minimum tax rate of 15%.
If the UAE’s Corporate Tax rate is lower than this, the group may face top-up taxes in other jurisdictions unless the UAE adopts a Domestic Minimum Top-Up Tax (DMTT).
This “beyond 9%” tax scenario is not relevant for most small and medium-sized businesses in the UAE but is crucial for global corporations operating through UAE subsidiaries.
Special Rates and Exemptions
In certain sectors, different tax treatments or exemptions apply. These include:
- Extractive industries: Exempt if already taxed by the Emirate
- Government entities and pension funds: Exempt
- Public benefit entities: May be exempt if registered with the FTA
- Qualifying investment funds: Subject to exemption upon meeting conditions
PEAK Business Consultancy Services assists in analyzing your entity’s eligibility for sector-specific exemptions and supports the application process with the FTA.
Effective Tax Planning Based on Slab Rates
Businesses can benefit from proper planning based on their applicable tax slab:
- Below AED 375,000: Aim to keep profits within the exemption range if applicable
- Above AED 375,000: Optimize expenses and deductions to reduce tax liability
- Free Zone businesses: Ensure qualification for 0% rate through substance and income segregation
- Multinational groups: Monitor Pillar Two impact and prepare for 15% effective rate
PEAK Business Consultancy Services provides strategic tax planning tailored to your slab rate and business model, ensuring optimal compliance and financial efficiency.
Filing Requirements Based on Tax Rate
All taxable entities, regardless of slab rate, must file a Corporate Tax return within 9 months of the end of their financial year—even if their tax rate is 0%.
Entities must also maintain financial records, supporting documents, and file any applicable transfer pricing disclosures.
Conclusion
The Corporate Tax slab rates in the UAE—0%, 9%, and potentially 15% under OECD alignment—reflect the country’s balanced approach to taxation. By offering relief for small businesses and incentives for Free Zone companies, while maintaining international standards for large groups, the UAE has established a competitive and responsible tax ecosystem.
Understanding these slab rates and how they apply to your business is key to effective tax compliance and planning.
Don’t navigate UAE Corporate Tax alone—PEAK Business Consultancy Services offers expert support to register, compute, and file your Corporate Tax returns with full confidence and accuracy.
Click here to get in touch with PEAK BCS and simplify your Corporate Tax journey today.
