UAE Corporate Tax & VAT Guide for Businesses

The UAE has shifted from a pure tax-free reputation to a structured but still highly competitive tax regime in under a decade. 5% VAT arrived in January 2018 under Federal Decree-Law No. 8 of 2017, and 9% federal corporate tax followed in June 2023 under Federal Decree-Law No. 47 of 2022, with a 0% band below AED 375,000 of taxable profit. Personal income tax remains at 0% — no salary tax, no capital gains tax, no dividend withholding for individuals. Layered on top, a Pillar Two global minimum tax of 15% began applying in 2025 for the largest multinational groups. This guide covers how those regimes fit together and what founders actually need to file.

UAE Corporate Tax at a Glance

Corporate Tax (CIT)

9% headline rate

The federal Corporate Tax Law applies a flat 9% rate to taxable profits above AED 375,000 for UAE-incorporated businesses — mainland and free zone, with a separate regime for qualifying free zone activities (see below). UAE permanent establishments of foreign companies are also in scope. The rate is calculated on accounting profit adjusted for tax-specific add-backs and deductions.

AED 375,000 threshold

Profits at or below AED 375,000 are taxed at 0%. The threshold is per taxable person and works as a small-business relief that keeps early-stage and SME activity outside the tax net. A separate Small Business Relief election exists for businesses with revenue below AED 3 million during a transitional period, with its own conditions and sunset.

Effective date

Corporate tax took effect for financial years starting on or after 1 June 2023. A calendar-year business was first in scope from 1 January 2024; a 1 April year-end from 1 April 2024. First returns were due nine months after each business's first in-scope FY closed.

Free zone exception — Qualifying Free Zone Person (QFZP)

Free zone companies sit in a distinct sub-regime. A Qualifying Free Zone Person (QFZP) retains a 0% rate on qualifying income instead of 9%. Status is conditional and tested annually. Headline conditions, set out in the Corporate Tax Law and Cabinet Decisions:

• Incorporated, registered, or established in a UAE free zone.
• Derives qualifying income from a defined list of qualifying activities — manufacturing and processing, fund management, holding of shares and securities, headquarter services to related parties, treasury and financing to related parties, narrowly defined IP holding, and certain qualifying commodity trading.
• Maintains adequate UAE substance proportionate to the activities.
• No material income from excluded activities (e.g. transactions with natural persons in most cases, certain banking and insurance outside permitted carve-outs).
• Complies with transfer pricing and prepares audited financial statements.
• Stays within the de minimis test — non-qualifying revenue below the lower of 5% of total revenue or AED 5 million per tax period.

Failing any test generally costs QFZP status for that period and the next four, with all income taxed at 9%. Non-qualifying income is taxed at 9% even when QFZP status is otherwise maintained. See our free zones comparison for how QFZP interacts with the choice of free zone.

Pillar Two Global Minimum Tax

The OECD/G20 Pillar Two framework imposes a 15% effective tax rate on multinational enterprise (MNE) groups with consolidated annual revenue of EUR 750 million or more in at least two of the four preceding fiscal years. The UAE adopted Pillar Two by Cabinet Decision in 2024, with the Domestic Minimum Top-up Tax (DMTT) effective from FYs beginning on or after 1 January 2025. For in-scope groups it overrides the 9% headline (and the 0% QFZP rate) by topping up the UAE effective rate to 15%. Groups below the EUR 750M threshold are unaffected.

Filing

Corporate tax is administered by the Federal Tax Authority (FTA) through the EmaraTax portal at tax.gov.ae. Every UAE business — including those expecting 0% — must register and obtain a Tax Registration Number (TRN). The annual return is due within nine months of the FY-end: a 31 December year-end files by 30 September of the following year. Returns are in AED, with payment due alongside.

Tax groups and consolidation

A UAE parent and its UAE subsidiaries can elect to form a Tax Group where the parent holds at least 95% of share capital, voting rights, and entitlement to profits and net assets, all members are UAE tax-resident, and they share the same FY and accounting standards. The group files a consolidated return as a single taxable person. QFZPs cannot generally be members while retaining QFZP status.

Transfer pricing rules

The UAE imports OECD-style transfer pricing rules. Related-party and connected-person transactions must follow the arm's-length principle. Groups above the thresholds set in the Cabinet Decisions must prepare a Master File and Local File; Country-by-Country Reporting applies separately to MNE groups already in scope under the OECD framework. Smaller businesses must still demonstrate arm's-length pricing on request. QFZPs must evidence compliance to maintain qualifying status.

Value-Added Tax (VAT)

5% standard rate

VAT applies at a flat 5% on most goods and services supplied in the UAE since 1 January 2018, under Federal Decree-Law No. 8 of 2017 and its Executive Regulations. The same 5% applies at the point of import for most goods entering the UAE outside any free zone exemption. The FTA administers VAT through EmaraTax alongside corporate tax.

Mandatory registration threshold

VAT registration is mandatory once taxable supplies and imports exceed AED 375,000 in the previous 12 months, or are reasonably expected to in the next 30 days. The threshold is rolling, not financial-year aligned. Registered businesses issue tax invoices, charge 5% on standard-rated supplies, and file through EmaraTax.

Voluntary registration threshold

Voluntary registration is open once taxable supplies, imports, or taxable expenses exceed AED 187,500 in the previous 12 months — common for B2B startups that want to reclaim input VAT on UAE expenses before crossing the mandatory threshold.

Exempt sectors

A defined list of supplies is exempt — no VAT is charged, and input VAT on costs to make those supplies is generally not recoverable. Headline categories:

• Certain financial services not provided for an explicit fee, commission, discount, or rebate (margin-based financial services).
• Residential real estate after the first supply (the first new-build sale is zero-rated; subsequent sales and most residential leases are exempt).
• Life insurance and life reinsurance.
• Bare land (undeveloped land).
• Certain local passenger transport.

Zero-rated sectors

A separate list is zero-rated — VAT is charged at 0%, and input VAT remains recoverable, which is generally more favourable than exemption. Headline categories:

• Exports of goods and services outside the GCC implementing states.
• International transport of passengers and goods, and related services.
• The first supply of new residential buildings within three years of completion.
• Certain healthcare and education services.
• Investment-grade precious metals — gold, silver, and platinum of 99% purity or higher in tradable form.
• Crude oil and natural gas for export.

Filing

VAT returns are filed through EmaraTax, quarterly for most businesses, with monthly cycles for larger taxpayers. Returns and any net VAT are due within 28 days of period-end. Late filing carries administrative penalties.

Reverse-charge mechanism

For imports of services from outside the UAE, the reverse charge mechanism applies: the recipient, not the foreign supplier, accounts for VAT — declaring both output and input on the same return. For a fully recoverable business it is cash-flow neutral but must still be reported. The same mechanism applies to certain imported goods and to specific local supplies, including certain gold and diamond transactions between registered dealers.

Other Taxes

Excise tax. A federal excise tax has applied since 2017, expanded in 2019: tobacco at 100%, energy drinks at 100%, electronic smoking devices and liquids at 100%, and carbonated and sweetened drinks at 50%. Administered by the FTA, registered separately from VAT, filed monthly.

Customs duty. A standard 5% customs duty applies on most imports under the GCC Customs Union Common External Tariff, with many products zero-rated and certain goods (alcohol, tobacco) at higher rates. Goods entering a UAE free zone and remaining inside — or being re-exported — are generally exempt; duty is collected only when goods enter the mainland for consumption.

Property transfer fees. Real estate transfer fees are emirate-level. In Dubai, the Dubai Land Department charges 4% of the property value, conventionally split buyer-seller (often paid in full by the buyer in practice). Other emirates charge 2–4%.

0% personal income tax. There is no personal income tax in the UAE: no salary tax, no individual return, no withholding on dividends, no capital gains tax on personal investments, and no inheritance or wealth tax. The 0% personal regime is one of the largest single drivers of inbound talent and remains untouched by the corporate tax reforms.

Compliance Calendar

For a business with a calendar-year financial year, the typical UAE tax compliance calendar looks like this:

Larger taxpayers may be assigned monthly VAT filing instead of quarterly. Tax-period assignments are set by the FTA on registration and shown in the EmaraTax dashboard.

Practical Tips for Founders

• Register early. Corporate tax registration is mandatory regardless of profit. Failure to register on time triggers penalties even if the eventual liability is zero. Register through EmaraTax as soon as the licence is issued.
• Keep clean books from day one. Both corporate tax and VAT rely on standard double-entry bookkeeping with proper invoices, contracts, and bank reconciliations. Retrofitting clean books later costs more than starting with them.
• Use the EmaraTax portal. All federal tax interactions — registrations, returns, payments, refunds — go through EmaraTax. Set up portal access well before the first filing deadline, not the night before.
• Plan for QFZP from the licence stage. If the business will be in a free zone, the QFZP analysis (qualifying activities, substance, audited accounts, no excluded income, transfer pricing) is far cheaper to design in at incorporation than to retrofit. Match the activity codes on the licence to the qualifying-activity list.
• Audit early if QFZP is the goal. QFZP requires audited financial statements. A small free zone company that has never engaged an auditor cannot claim 0% on qualifying income retroactively.
• Plan for Pillar Two only if relevant. Pillar Two applies only to MNE groups with EUR 750M+ revenue. If in scope (typically through joining or acquisition by a large group), the 15% top-up may erase the QFZP benefit. Otherwise, ignore it.
• Treat related-party transactions carefully. Transfer pricing applies even to small UAE businesses with cross-border or related-party flows. Document arm's-length pricing on management fees, royalties, and intra-group financing from the start.

Frequently Asked Questions

Is the UAE still tax-free?

Not entirely, but it remains very lightly taxed by international standards. There is no personal income tax on salary, dividends, or capital gains, and no inheritance or wealth tax. Companies pay 9% corporate tax above AED 375,000 of profit and 0% below, with QFZPs retaining 0% on qualifying income. VAT is 5%, and excise applies only to specific harmful goods.

What is the 9% corporate tax?

The UAE's federal Corporate Tax (CIT), introduced under Federal Decree-Law No. 47 of 2022, effective from FYs starting on or after 1 June 2023. It applies a flat 9% rate to profits above AED 375,000 for UAE-resident companies and UAE permanent establishments of foreign companies. Profits at or below AED 375,000 are taxed at 0%. Administered by the FTA through EmaraTax.

Do free zone companies pay corporate tax?

Yes — they are within scope. A free zone company that meets the Qualifying Free Zone Person (QFZP) conditions retains a 0% rate on qualifying income. Non-qualifying income is taxed at 9%. A QFZP that breaches any qualifying condition (including the 5% / AED 5 million de minimis test) loses qualifying status for the period and the next four periods, with all profits then taxed at 9%.

What is a Qualifying Free Zone Person?

A QFZP is a free zone entity that meets the FTA's tests for substance and qualifying activity: incorporated in a UAE free zone; deriving qualifying income from a defined list of qualifying activities (manufacturing, fund management, holding of shares, headquarter services, certain commodity trading); maintaining adequate UAE substance; preparing audited financial statements; complying with transfer pricing; and staying within the de minimis limits. QFZP status delivers 0% on qualifying income and 9% on non-qualifying income.

When did UAE corporate tax start?

It took effect for financial years starting on or after 1 June 2023. Calendar-year businesses were first in scope from 1 January 2024; the first return was due nine months after that FY closed.

What's the AED 375,000 threshold?

Taxable profits at or below AED 375,000 are taxed at 0%. Profits above AED 375,000 are taxed at 9% on the excess. The threshold is per taxable person and is intended as a small-business carve-out keeping most early-stage businesses outside the corporate tax net.

Do startups pay UAE corporate tax?

Most early-stage startups owe little or none in practice — profits below AED 375,000 are taxed at 0%, and pre-revenue startups have no taxable profit. Registration, however, is mandatory regardless of profit. Every UAE business must register through EmaraTax, obtain a tax registration number, and file an annual return — even when the liability is zero. Some early-stage businesses also elect into Small Business Relief during its transitional window.

Where do I file UAE corporate tax?

Through the EmaraTax portal of the FTA at tax.gov.ae. The same portal handles VAT, excise, and corporate tax. The annual return is due within nine months of the FY-end.

Do I need to register for VAT?

Mandatory if taxable supplies and imports exceed AED 375,000 in the previous 12 months, or are reasonably expected to in the next 30 days. Voluntary registration opens above AED 187,500. Many B2B startups register voluntarily to recover input VAT before crossing the mandatory threshold.

What is Pillar Two?

The OECD/G20 framework imposing a 15% global minimum effective tax rate on multinational groups with consolidated annual revenue of EUR 750 million or more. The UAE adopted Pillar Two by Cabinet Decision in 2024, with the Domestic Minimum Top-up Tax effective from financial years beginning on or after 1 January 2025. For in-scope groups it overrides the 9% headline (and the 0% QFZP rate) by topping up UAE effective rates to 15%. It does not affect ordinary UAE SMEs.

For context: Business Guide hub, Regulations, Government Subsidies & Support.