United Arab Emirates: corporate tax guide

What the tax system covers

UAE-resident juridical persons generally enter corporate tax on UAE and foreign income. A qualifying free-zone person can obtain 0% on qualifying income only under the separate regime; forming in a free zone does not make all receipts exempt.

When a company becomes tax resident

A UAE-incorporated or established legal person is ordinarily resident for corporate tax. Foreign legal persons effectively managed and controlled in the UAE can also be resident. The legal entity’s residence is separate from its shareholder’s domestic residence and visa.

Rates and the tax base

0% up to AED 375,000; 9% above. Ordinary federal corporate tax is calculated on taxable income, not turnover. Qualifying Free Zone Persons, exempt persons and multinational minimum-tax rules operate separately.

Outbound dividends, interest and royalties

Dividends: 0%. The federal corporate-tax withholding rate on relevant UAE-source payments to nonresidents is currently 0%. This does not determine any tax in the recipient’s country or tax on a UAE permanent establishment.

Interest: 0%. The federal corporate-tax withholding rate on relevant UAE-source payments to nonresidents is currently 0%. This does not determine any tax in the recipient’s country or tax on a UAE permanent establishment.

Royalties: 0%. The federal corporate-tax withholding rate on relevant UAE-source payments to nonresidents is currently 0%. This does not determine any tax in the recipient’s country or tax on a UAE permanent establishment.

Follow the decisions and the operating presence

A foreign company can be effectively managed and controlled in the UAE when its significant commercial and strategic decisions are substantively made there. A founder directing a foreign group from Dubai should examine that position even if none of the customers is in the UAE.

Document who approves budgets, contracts and risk decisions, and where they exercise that authority. Board minutes should record actual deliberation. Dual residence requires the relevant treaty analysis; a foreign certificate of incorporation is not conclusive. Company residence and a nonresident permanent establishment remain distinct routes into the tax charge.

Ordinary corporate tax: a profit calculation

Under the ordinary regime, taxable income up to AED375,000 is charged at 0% and the excess at 9%. For a simple company with AED2 million of taxable income, no special regime and no credits, tax is 9% of AED1,625,000, or AED146,250.

Taxable income is not revenue or the cash remaining in the bank. Reconcile accounting profit with the tax adjustments before using the bands. Qualifying Free Zone Persons follow a different rate framework, and the AED375,000 ordinary band must not be casually applied to their non-qualifying income.

Expense deductions and payments to owners

Business deductions require a connection to earning taxable income. Private expenditure must be excluded or apportioned, while capital items follow the relevant accounting and tax treatment. The taxable-income guide identifies specific disallowances such as fines and illicit payments; an amount appearing in the accounts is not automatically deductible.

Payments to connected persons, including relevant owners and directors, require market value for the service or benefit and satisfaction of the business-purpose condition. A large owner salary should therefore be supported by actual duties and a defensible remuneration level. A personal wage exclusion does not by itself establish an unlimited deduction for the company.

Small Business Relief: current timing and eligibility

The August 2026 amendment extends Small Business Relief to tax periods ending on or before 31 December 2029. Eligible resident persons with revenue no higher than AED3 million in the current and previous relevant periods may elect to be treated as deriving no taxable income for that period.

The election is annual. Qualifying Free Zone Persons and covered multinational-group members cannot use it, and the arm’s-length principle continues to apply. Preserve the complete revenue history and document the election. Artificially splitting a business to create several amounts below the ceiling requires anti-abuse review.

Free-zone status does not make every receipt qualifying

Qualifying Free Zone Persons can obtain 0% on qualifying income while taxable income outside that category can bear 9%. Maintaining adequate substance, meeting the income conditions, applying arm’s-length rules and preparing audited financial statements are central requirements.

The de minimis test uses the lower of 5% of relevant adjusted revenue and AED5 million, with specific exclusions from its numerator and denominator. Failure can remove qualifying status from the start of the failed period and for the next four periods. Classify customer, activity, intellectual property, property and permanent-establishment income before applying that test; a gross accounting revenue total alone is insufficient.

Use the current qualifying-activities decision

Ministerial Decision 229 of 2025 replaced Decision 265 of 2023. Its activity definitions govern the qualifying and excluded categories; these should be checked for the actual service or goods flow rather than inferred from the licence label. In particular, distribution, treasury and commodity arrangements have detailed boundaries.

A further decision announced in February 2026 identifies Dubai’s VARA as a competent authority for specified fund-management and wealth-and-investment-management activities. That clarification is not a blanket exemption for every virtual-asset activity. Match the regulated activity, licence and revenue to the relevant decision.

Related-party pricing applies beyond the documentation thresholds

Transactions with related parties and connected persons must be priced consistently with the arm’s-length principle. The FTA guide uses functional analysis: what each party does, which assets it uses and which commercial risks it controls. Both domestic and cross-border arrangements can be relevant.

Identify the goods, services, finance or intellectual-property transaction before selecting a pricing method. Master-file and local-file thresholds are documentation rules, not an automatic exemption from proper pricing below the threshold. Keep agreements consistent with invoices, staff responsibilities and the real services supplied; a year-end management fee needs evidence of its benefit and basis.

Interest deductions: model both limits and carryovers

Where the general interest limitation applies, deductible net interest is constrained by the greater of AED12 million and 30% of adjusted EBITDA. Exceptions exist for specified taxpayers and arrangements. Disallowed net interest can be carried forward for ten subsequent tax periods under the conditions.

For a tax group, the calculation operates at group level, rather than giving every member an independent AED12 million allowance. Related-party borrowing and specific uses of the loan require additional analysis. Debt principal, interest expense and foreign withholding are separate items and should not be merged into one financing deduction.

Losses do not automatically eliminate the next profitable year

Eligible tax losses can be carried forward, generally subject to a maximum offset of 75% of the relevant taxable income. There is no general carryback. Ownership and business-continuity conditions need to be checked before valuing losses after an acquisition or restructuring.

For example, an available AED1 million loss does not necessarily remove all AED1 million of later income: a 75% cap would permit AED750,000 of offset before the rate calculation. The remaining AED250,000 is then assessed under the taxpayer’s applicable rate regime. Losses from exempt activity or a relief period need separate treatment.

Foreign taxes, dividends and branch profits

Foreign tax credit relief cannot exceed the UAE corporate tax attributable to the relevant foreign income. Excess foreign tax is not carried forward or back. A low UAE rate can therefore leave foreign tax as a final economic cost even where the income is fully reported in the UAE.

Assess exemptions before computing a credit. Participation income and a qualifying foreign permanent establishment have separate requirements; an overseas dividend is not universally exempt merely because the payer is foreign. Record the taxpayer, source, legal character and foreign tax certificate for each receipt, then document the applicable exemption or credit calculation.

VAT has its own registration and supply rules

Ordinary mandatory registration uses AED375,000 of taxable supplies and imports over twelve months or expected in the next thirty days. Voluntary registration can begin at AED187,500, including qualifying expenses. A free-zone licence does not dispense with these tests.

Foreign businesses making relevant UAE supplies need a separate registration analysis and cannot simply use the resident threshold. Goods, services, imports, zero-rated exports and exempt supplies affect the calculation differently. Reconcile VAT turnover with revenue in the corporate-tax records without assuming that their taxable bases are identical.

Large groups need a separate minimum-tax assessment

The domestic top-up tax applies for fiscal years beginning on or after 1 January 2025 to constituent entities in covered multinational groups. The FTA’s October 2026 guidance uses a EUR750 million consolidated revenue test met in at least two of the four preceding fiscal years.

That regime uses its own group, location and computation rules. A free-zone 0% result under ordinary corporate tax does not by itself establish the group’s final UAE effective tax outcome. Most independent small businesses will be outside the stated group threshold, but a subsidiary must examine its consolidated parent group.

Build registration, filing and closure into the operating calendar

All taxable juridical persons must register according to the applicable FTA timetable. A nil expected liability or Small Business Relief election does not itself remove registration. The FTA maintains a separate late-registration penalty-waiver initiative with its own first-return timing conditions.

Returns and tax payment are generally due within nine months of the tax period end; the FTA’s 2026 reminder expressly includes relief users. If activity ceases, submit the required deregistration application and settle final reporting and liabilities. Retain supporting records after closure. The owner’s departure, cancellation of a licence and completion of tax deregistration are separate events.

CFC attribution, company residence and minimum tax are different

The Ministry’s explicit no-CFC statement is the basis for this classification. Its separate domestic minimum top-up tax applies to in-scope UAE entities in groups meeting the EUR 750 million revenue test in at least two of the preceding four years, for financial years beginning from 1 January 2025. That domestic minimum tax is a different mechanism.

Under Article 11, a foreign-incorporated company effectively managed and controlled in the UAE can itself be a UAE resident person. An owner who directs that company from Dubai must therefore consider where substantive strategic decisions occur. The absence of shareholder-level CFC attribution does not establish that the company is foreign for UAE corporate-tax purposes.

Moving assets to a foreign branch

Article 24(5), within the foreign-permanent-establishment exemption framework, treats transfers of assets or liabilities between a resident person and its foreign permanent establishment at market value for determining the resident’s taxable income. A branch is not a separate subsidiary, but transferring an asset to it can still have a corporate-tax consequence. Confirm the exemption framework and transfer facts before assuming that internal ownership makes the movement tax-neutral.

A residence change can undo earlier group-transfer relief

Article 26 relief has a two-year clawback period. The FTA gives an explicit example of a foreign-incorporated company ceasing to be managed and controlled in the UAE without retaining a UAE permanent establishment: it ceases to be a taxable person and can break qualifying-group membership. The relevant question includes earlier relieved transfers, not only assets moved on the departure date.

On clawback, the original transfer is recalculated using its market value at the original transfer date. For a hypothetical relieved asset with AED 1 million net book value and AED 1.5 million market value at that date, the difference is AED 500,000, even if a later valuation differs. The FTA generally allocates the adjustment to the transferor in the clawback period; where that transferor has ceased to be a taxable person, it is attributed to the transferee. This identifies a specific recapture rule, not a universal exit-tax charge.

Foreign companies and income attribution

The Ministry of Finance expressly states that the UAE corporate tax regime has no controlled foreign company regime. This concerns attribution of a foreign company’s income to its UAE owner; it does not remove the foreign company’s own UAE residence, permanent-establishment or other tax exposure.

Departure, migration and continuing obligations

Specific cross-border asset-transfer and residence-related charges are identified. Article 24(5) requires market-value treatment for covered transfers between a resident person and its foreign permanent establishment. Separately, ending UAE taxability within two years of a relieved qualifying-group transfer can claw back the earlier gain under Article 26. This does not establish a general departure tax on every company or every asset.