Around 44% of UAE businesses reported being prepared to comply with the new corporate tax rules as of mid‑2023, with many citing a lack of clarity on the tax framework as their biggest obstacle. This reveals a clear gap between awareness and readiness
Corporate tax in the UAE directly affects how companies earn, spend, and report income. Understanding the UAE corporate tax rate is crucial, but knowing how to apply it, who it affects, and how to calculate taxable income accurately is even more important.
In this article, we explain everything you need to know about the UAE corporate tax rate in 2025, and how finance teams can stay compliant without adding complexity to their expense workflows.
Key Takeaways:
- Corporate tax now applies to most businesses operating in the UAE.
- The tax is calculated on net profits after subtracting deductible business expenses.
- Free zone companies may qualify for a 0% rate, but only under strict conditions.
- Government entities, public benefit organisations, and qualifying funds remain exempt.
- Poor expense records and missing VAT-compliant receipts can trigger penalties or limit deductions.
What Is Corporate Tax?
Corporate tax is a tax on a company's net profits. Businesses calculate it after subtracting eligible expenses from their income. Most governments use corporate tax to fund public services and regulate business activity.
What Is the Corporate Tax Rate in the UAE?
The UAE applies corporate tax on a company's taxable profits, not total revenue. Since 1 June 2023, businesses have followed the federal framework set by the Ministry of Finance.
Under current rules, the UAE corporate tax structure is:
This structure shields smaller businesses while ensuring larger firms contribute.
From 1 January 2025, MNEs with consolidated global revenues of €750 million or more (roughly AED 3 billion) in at least two of the prior four fiscal years must comply with the 15% global minimum tax, as per the UAE's Domestic Minimum Top-up Tax, aligned with OECD Pillar Two rules.
Who is Subject to UAE Corporate Tax?
The UAE corporate tax rate applies to both resident and non-resident persons engaged in business activities in the country. The framework distinguishes between juridical persons, natural persons, and special cases.
Resident Persons
All resident persons fall under the scope of UAE corporate tax. This includes:
- UAE-incorporated entities: Companies set up under mainland or Free Zone laws, including branches of foreign companies operating in Free Zones.
- Foreign entities effectively managed in the UAE: Companies incorporated outside the UAE but managed and controlled from within the country.
- Government and quasi-government entities: Entities taxed unless specifically exempt under Article 4 of Federal Decree-Law No. 47 of 2022.
- Natural persons (individuals): Individuals who conduct business in the UAE (e.g., freelancers, sole proprietors) and whose business turnover exceeds AED 1,000,000 in a calendar year. However, income from wages, personal investments, or real estate investments is not taxable.
Non-Resident Persons
Non-residents face UAE corporate tax in three scenarios:
- Permanent Establishment (PE): If a non-resident maintains a fixed place of business in the UAE or operates through a dependent agent. Income attributable to the PE is taxed at 9%.
- State-sourced income: Includes revenue from UAE-based goods and services, income from UAE immovable property, or interest from loans secured by UAE assets.
- Nexus in the UAE: A taxable presence created through economic activity or digital services as defined by Cabinet decisions.
Special Cases
- Branches of foreign companies: Treated as non-resident persons if the parent company is foreign. Taxation depends on whether they create a PE or earn UAE-sourced income.
- Natural persons with dual status: Foreign individuals temporarily conducting business in the UAE face taxation if their turnover exceeds AED 1,000,000 or if they maintain a PE.
Who is Exempted from UAE Corporate Tax?
The UAE Corporate Tax Law exempts specific entities and activities. Here's a clear breakdown of who qualifies:
How to Calculate Corporate Tax in the UAE?
Calculating corporate tax in the UAE involves four simple steps:
1. Determine Accounting Profit
Start with the net profit from your financial statements, prepared under IFRS or IFRS for SMEs.
2. Adjust for Tax Purposes
Make adjustments as per UAE tax rules:
- Add back non-deductible expenses (e.g., penalties, certain entertainment costs)
- Deduct exempt income (e.g., qualifying dividends)
- Apply any reliefs (e.g., small business relief, group relief)
3. Calculate Taxable Income
Taxable Income = Accounting Profit ± Adjustments
4. Apply Tax Rates
- 0% on the first AED 375,000 of taxable income
- 9% on taxable income above AED 375,000
Example Calculation
Once your taxable income is finalised and the applicable corporate tax rate is applied, your company tax report can be generated and exported for filing or audit purposes.
Filing Your Corporate Tax Return in the UAE
Once your company is registered, you’ll need to prepare for your first UAE corporate tax return. This must be submitted within 9 months after the end of your financial year.
For businesses following a January–December cycle, the initial tax period will run from 1 January 2024 to 31 December 2024, making 30 September 2025 the deadline for filing your first UAE tax return.
Businesses are also required to maintain relevant documents and records for 7 years after each tax period, a key part of staying audit-ready and compliant.
How Alaan Helps You Stay Corporate Tax Compliant
Alaan is a purpose-built spend management platform for businesses in the UAE. We streamline expense tracking, enforce policy controls, and automate documentation, helping your team stay audit-ready and compliant with UAE corporate tax regulations.
What We Offer:
- Corporate Cards with Real-Time Tracking: Issue corporate cards with spend limits. Every transaction is automatically categorised, making tax-relevant expenses easy to track.
- Smart Receipt Capture and VAT Validation: Employees upload receipts, and our AI extracts key fields like VAT, TRN, and merchant name. This ensures documentation is matched and stored for every claim.
- Built-in Policy Controls and Pre-Approvals: Set rules by category, department, or vendor. Reduce the risk of non-deductible or non-compliant expenses before they even occur.
- Direct Integration with Accounting Software: Seamlessly sync with Xero, QuickBooks, Zoho, and NetSuite. No manual uploads or formatting, just clean, structured, and compliant data.
- Instant Audit Trails and Reporting: Download expense reports by tax category, employee, or project. Perfect for calculating taxable income or preparing supporting documentation during audits.
Why Finance Teams Choose Alaan?
✔️ Maintain clear records of deductible expenses
✔️ Eliminate missing receipts or invalid tax claims
✔️ Simplify monthly closings and corporate tax filing
✔️ Reduce manual admin with automation
✔️ Stay aligned with UAE Federal Tax Authority (FTA) expectations
Ready to simplify spend and stay compliant?
Wrapping Up
Understanding the UAE corporate tax rate is just the start. Staying compliant takes consistent financial discipline, accurate expense records, and a reliable system to manage both. That’s where Alaan helps your finance team stay audit-ready—without the usual manual burden.
From tax-deductible tagging to real-time spend controls, we make compliance easy.
FAQs on UAE Corporate Tax
Q1. Has corporate tax been implemented in the UAE?
Yes, corporate tax was introduced in the UAE on June 1, 2023. A standard rate of 9% applies to taxable profits exceeding AED 375,000. The aim is to align with global tax standards while preserving the UAE’s business-friendly environment.
Q2. How does VAT differ from corporate tax?
- VAT is an indirect tax levied on the sale of goods and services, currently set at 5%.
- Corporate tax is a direct tax on net business profits.
VAT is applied at the transaction level, while corporate tax is calculated annually based on accounting profits after allowable adjustments.
Q3. Is corporate tax registration mandatory in the UAE?
Yes. The Federal Tax Authority (FTA) began corporate tax registration for private and public joint-stock companies on May 15, 2023. Registration will extend to other types of entities in phases. Early registration is advised to avoid penalties and ensure compliance.
Q4. What is the tax period for corporate tax?
The tax period typically follows your company’s financial year, whether it matches the calendar year or another 12-month cycle. The first tax period starts on or after June 1, 2023, depending on the company’s accounting year.
Q5. Does corporate tax apply to Free Zone companies in Dubai?
Yes, Free Zone businesses are subject to UAE corporate tax but may qualify for a 0% tax rate on eligible income, provided they meet substance requirements and do not engage in business with mainland entities. Non-qualifying income is taxed at 9%.
Q6. What are the filing requirements for corporate tax returns?
Businesses must use the new tax forms available on the FTA portal to file their annual return.
