It has been just under two years since the UAE rolled out federal corporate tax at 9%, and the questions in our inbox have not slowed down. This guide is the version we wish we had when CT first came into force, every threshold, exemption, and gotcha, in one place.
What you'll learn
→ Who actually pays UAE corporate tax → Small Business Relief, the AED 3M shortcut → The free zone qualifying income rule → Filing, deadlines, and the four most expensive mistakesWho actually pays UAE corporate tax
Almost every UAE-resident business, mainland LLCs, free zone companies, branches of foreign companies, falls within scope. Government entities, qualifying public benefit entities, certain investment funds and pension funds are out of scope. Natural persons are taxable only when their business activity exceeds AED 1 million per year.
For everyone else there are two brackets: 0% on taxable income up to AED 375,000 per year, and 9% on taxable income above AED 375,000. That threshold applies entity-by-entity, even if you have multiple licences under one beneficial owner.
Small Business Relief, the AED 3M shortcut
If your revenue (not profit, revenue) for the financial year is below AED 3,000,000, you can elect into Small Business Relief. SBR effectively treats you as having zero taxable income, regardless of your actual profit. You still file, but the bottom-line tax is zero.
The relief is available until end of 2026. Three caveats: you cannot be a Qualifying Free Zone Person and claim SBR (you pick one); the election is not automatic; and it applies entity-by-entity, so a holding structure can have one entity on SBR and another on standard 9%.
The free zone qualifying income rule
If you operate in a designated free zone (DMCC, JAFZA, DIFC, ADGM, IFZA, RAKEZ and 25 others) you can still pay 0%, as a Qualifying Free Zone Person (QFZP), provided your income is qualifying. Qualifying income includes B2B sales to other free zone persons, listed qualifying activities, and limited foreign income not attributable to a UAE permanent establishment.
Income from UAE mainland customers, B2C sales to natural persons, and excluded activities (banking, insurance, non-commercial real estate) are non-qualifying. There is a de-minimis allowance of AED 5M or 5% of total revenue, whichever is lower. Cross that line by even AED 1 and you lose QFZP status for that year and the next four.
Filing, deadlines, and the four most expensive mistakes
Your CT-101 return is due 9 months after your financial year-end. Tax payable on the same date, no instalments, no deferrals. You also need to file even if you owe nothing, including SBR claimants and QFZPs.
The four mistakes we see again and again in voluntary disclosures: forgetting that holding companies file too, mixing personal and business expenses, misclassifying mainland sales as B2FZ, and not electing into the right Tax Group structure before year-end. Each costs five figures on average to fix.
This guide is general information, not professional advice. For situations that involve specific facts, talk to your accountant, or hire one of ours from the marketplace.