Corporate Tax in UAE for New Businesses: Everything You Need to Know in 2026
The UAE introduced corporate tax under Federal Decree-Law No. 47 of 2022. It came into effect for financial years starting on or after 1 June 2023. If your business was incorporated in December 2023, your first taxable period likely started 1 January 2024 and your first corporate tax return is due in 2025. If your business was incorporated in July 2023, your first taxable period started 1 July 2023 and your first return may already be overdue. Corporate tax in UAE for new businesses is no longer a future obligation, it is a present one. This guide explains the framework accurately, in full, with no simplifications that create compliance risk. 1. The Core Framework: Rates, Thresholds, and Who it Applies To Corporate tax in the UAE applies to the taxable income of juridical persons, companies, partnerships, and other legal entities, registered in the UAE. It also applies to natural persons conducting business or business-related activity in the UAE where their annual business revenue exceeds AED 1 million. The rate structure is straightforward on paper but contains important conditions in practice. Taxable Income Band Corporate Tax Rate Applies To AED 0 to AED 375,000 0% All taxable persons — this portion is always tax free Above AED 375,000 9% The amount exceeding AED 375,000 only Qualifying Free Zone Income 0% Free zone persons meeting all qualifying conditions Non-Qualifying Free Zone Income 9% Free zone income that fails any qualifying condition Multinational groups (Pillar Two) 15% MNE groups with global revenue exceeding EUR 750 million What the 9% rate actually means for a new business: a company generating AED 800,000 in taxable profit pays 0% on the first AED 375,000 and 9% on the remaining AED 425,000, a tax liability of AED 38,250. Effective tax rate on total profit: approximately 4.8%. This is why even after corporate tax the UAE remains one of the lowest-tax business environments in the world. Who is subject to UAE corporate tax Who is exempt from UAE corporate tax Important: exemption is not automatic for any of the above categories except government entities. All others must apply to the FTA for exempt status. A charity that assumes it is exempt without applying and receiving confirmation is a taxable person that has failed to register and file. 2. The Financial Year, Tax Period, and Registration Deadline This is where most new businesses make their first mistake, and it is an expensive one. Your financial year determines everything Your corporate tax period is your financial year — the 12-month period for which you prepare your accounts. For most UAE companies this is the calendar year (1 January to 31 December), but it does not have to be. Companies can choose any 12-month period as their financial year, and whatever is stated in your Memorandum of Association or trade license is your financial year for corporate tax purposes. The critical rule: corporate tax applies to financial years starting on or after 1 June 2023. This means: Registration deadline, the rule that is catching new businesses Every UAE business must register for corporate tax with the Federal Tax Authority, regardless of whether it expects to owe any tax. Registration is mandatory even for businesses that will claim Small Business Relief and pay zero tax. Incorporation Date Registration Deadline Penalty for Late Registration Incorporated before 1 March 2024 Deadline has passed — register immediately if not done AED 10,000 fixed penalty Incorporated 1 March 2024 to 31 May 2024 Within 3 months of incorporation date AED 10,000 fixed penalty Incorporated from 1 June 2024 onwards Within 3 months of incorporation date AED 10,000 fixed penalty The registration penalty is AED 10,000 regardless of tax owed. A company that registers 1 day late and owes zero tax still pays AED 10,000. The FTA identifies unregistered companies by cross-referencing trade license data. If you have not registered and your company has been operational for more than 3 months, register now and engage a tax advisor to assess your position. 3. Small Business Relief: The Zero-Tax Option for Most New Businesses Small Business Relief (SBR) is the most practically important provision in the UAE corporate tax law for new businesses. If it applies to you, your effective tax liability is zero for the relevant tax period, but you must still register, still file a return, and still elect the relief correctly. The conditions for Small Business Relief The AED 3 million threshold is a hard cliff. Revenue of AED 3,000,001 in a tax period means SBR is unavailable for that entire period. You pay 9% on taxable income above AED 375,000 for the full year. There is no tapering. A business with AED 3,000,001 in revenue and AED 400,000 in taxable profit pays AED 2,250 in corporate tax (9% on AED 25,000). A business with AED 2,999,999 in revenue and AED 1,000,000 in taxable profit pays zero under SBR. The cliff creates a perverse incentive around the threshold that businesses should be aware of but not act on improperly. What revenue means for SBR purposes Revenue is your total gross income from all sources before any deductions. It is not taxable income, not profit, not net revenue. It is the top line of your income statement. A consulting firm invoicing AED 3.2 million even if its costs leave it with a AED 200,000 profit cannot claim SBR. The test is revenue, not profit. The SBR trap: consecutive years and artificial splitting SBR is available for each tax period independently, there is no restriction on claiming it for multiple consecutive years as long as the conditions are met each time. However, the FTA has anti-abuse provisions that allow it to disregard or recharacterise arrangements that artificially split a business across multiple entities to keep each entity below the AED 3 million threshold. Splitting a genuine single business into multiple licensed entities primarily to access SBR across multiple entities rather than for genuine commercial reasons is a structure the FTA can challenge. 4. Free Zone Companies:
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