The Corporate Tax Regime in the UAE: Rates, Thresholds & Relief Provisions
The enactment of Federal Decree-Law No. 47 of 2022 on the Taxation of Corporations and Businesses marked a historic modernization of the UAE's commercial tax architecture. Designed to align the federation with OECD Pillar Two international tax standards while preserving an ultra-competitive business climate, the corporate tax law features one of the most generous base exemption brackets in the world.
Whether you operate an LLC on the Dubai mainland, manage an export-import hub in a Sharjah free zone, or run a high-growth tech startup, mastering taxable profit deductions, Small Business Relief (SBR), and transfer pricing rules is paramount. On our UAE tax and financial calculation hub, entrepreneurs can cross-evaluate 5% VAT invoices, employee payroll burdens, and commercial borrowing costs within one unified financial ecosystem.
The AED 375,000 Zero-Tax Threshold
Unlike jurisdictions that tax profits from the very first dollar, the UAE applies a statutory 0% tax rate on all net taxable profits up to AED 375,000. Only profits earned above this threshold are taxed at the headline 9% statutory rate. This structure means small and emerging businesses generate zero corporate tax liability.
Small Business Relief (SBR): Zero Tax for Revenue up to AED 3 Million
To foster SME growth, the Ministry of Finance issued Ministerial Decision No. 73 of 2023 on Small Business Relief:
- Revenue Ceiling: A resident taxable person (incorporated company or individual business) with gross revenue of AED 3,000,000 or less in the relevant tax period may elect for Small Business Relief.
- Complete Exemption: When elected, the business is treated as having no taxable income for that period, resulting in AED 0.00 corporate tax regardless of profit margins.
- Sunset Date: SBR applies to tax periods commencing on or after June 1, 2023, and concluding on or before December 31, 2026.
- Simplified Compliance: Businesses under SBR do not need to calculate taxable profit adjustments or comply with complex transfer pricing documentation.
Corporate Tax Liability Matrix Across Common Profit Levels
| Net Accounting Profit | 0% Tier (Up to 375k) | 9% Tier (Above 375k) | Total Corporate Tax | Effective Tax Rate |
|---|---|---|---|---|
| AED 250,000 | AED 250,000 @ 0% | AED 0 | AED 0.00 | 0.00% |
| AED 375,000 | AED 375,000 @ 0% | AED 0 | AED 0.00 | 0.00% |
| AED 500,000 | AED 375,000 @ 0% | AED 125,000 @ 9% | AED 11,250.00 | 2.25% |
| AED 1,000,000 | AED 375,000 @ 0% | AED 625,000 @ 9% | AED 56,250.00 | 5.63% |
| AED 2,500,000 | AED 375,000 @ 0% | AED 2,125,000 @ 9% | AED 191,250.00 | 7.65% |
Qualifying Free Zone Persons (QFZP): 0% Tax Rules
Under Cabinet Decision No. 55 of 2023, free zone companies can maintain a 0% corporate tax rate if they qualify as a Qualifying Free Zone Person (QFZP):
- Maintain adequate economic substance (full-time employees and physical operating assets in the free zone).
- Derive "Qualifying Income" (transactions with other free zone persons or designated qualifying activities like manufacturing, fund management, and international logistics).
- Comply with transfer pricing rules and audited financial statements.
- Keep non-qualifying revenue within the de minimis threshold (the lower of 5% of total revenue or AED 5,000,000).