UAE Corporate Tax for Small Businesses: What You Need to Know

Most UAE businesses are now within the federal corporate tax regime. For small businesses the headline is: taxable income up to AED 375,000 is taxed at 0%, and income above that at 9%. Eligible businesses with revenue up to AED 3 million can elect Small Business Relief, treating them as having no taxable income, for tax periods ending by 31 December 2029. Free zone companies that are qualifying free zone persons can pay 0% on qualifying income if they meet strict conditions. In every case, you must register with the Federal Tax Authority (FTA) and file returns.

This guide is general information, not tax advice. Your position depends on your facts. Speak to a qualified UAE tax adviser.

UAE-incorporated companies—mainland and free zone—are taxable persons. Individuals conducting business in the UAE above a turnover threshold may also be caught. Foreign companies can be taxable if they have a permanent establishment or UAE-sourced income. Some entities, such as qualifying public benefit entities and certain investment funds, may be exempt if they apply and qualify.

Taxable income is broadly accounting profit adjusted for specific items. The first AED 375,000 of taxable income is taxed at 0%; income above that is taxed at 9%. For example, a company with taxable income of AED 500,000 would pay 9% on AED 125,000. Large multinational groups may face different rules under the global minimum tax framework, which is outside the scope of this guide.

A free zone company can pay 0% on qualifying income if it is a qualifying free zone person. Conditions include maintaining adequate substance in the free zone, earning qualifying income (as defined in the rules), not electing to be subject to the standard rates, complying with transfer-pricing rules, and preparing audited financial statements. There is also a de minimis limit on non-qualifying revenue—exceed it and the company can lose the regime for several years.

The practical message: free zone status alone does not make you tax-free. If you rely on the regime, design your activities and contracts around the conditions and keep evidence.

Small Business Relief allows resident persons with revenue at or below AED 3 million in the relevant and previous tax periods to be treated as having no taxable income. It has been extended to tax periods ending by 31 December 2029. It must be elected in the tax return. Qualifying free zone persons and members of large multinational groups cannot use it. Artificially splitting a business to stay under the threshold is prohibited.

Yes. Registration with the FTA is required for taxable persons, and returns must generally be filed within nine months of the end of the tax period. Late registration can attract penalties. Keep proper accounting records for the statutory retention period. Even if you pay no tax—because of the 0% band, Small Business Relief or the free zone regime—filing is still mandatory.

VAT is a separate tax at 5%, with mandatory registration above a turnover threshold. The UAE is also phasing in e-invoicing during 2026–2027, which will change how invoices are issued and reported. Our separate guide covers what small businesses should do now.

A practical checklist:

The illustration below uses round figures to show how the band works. It ignores reliefs, adjustments, exempt income and the qualifying free zone regime, and it is not tax advice—your accountant must calculate your actual liability.

Whatever rate you end up paying, the compliance calendar is similar.

Small Business Relief lets eligible resident businesses with revenue under the current limit be treated as having no taxable income for a tax period, if they elect for it. It is not automatic and has exclusions—for example, it is generally not available to qualifying free zone persons or members of large multinational groups.

The qualifying free zone person regime can give 0% on qualifying income, but only if you meet conditions such as adequate substance in the zone, deriving qualifying income, not electing to be subject to the standard regime and complying with transfer pricing rules. Falling out of the regime can have consequences for several years, so this is an area for your tax adviser.

Corporate tax depends on reliable accounts. Keep sales and purchase invoices, bank statements, contracts, payroll records and evidence for any related-party transactions. Records generally need to be kept for several years. Good bookkeeping from the first month makes filing, audits and bank reviews much easier—and is far cheaper than reconstructing a year later.

If you are part of a group or transact with companies you or your family control, transfer pricing rules may require you to show that those transactions are at arm’s length. Discuss this with your accountant early.

Moving to Dubai does not automatically end UK tax obligations. Your personal UK tax residence is determined by the Statutory Residence Test, and a UAE company can be treated as UK tax resident if it is centrally managed and controlled from the UK. The UK–UAE double taxation agreement may help in some situations, but its application depends on the facts.

This is exactly why we coordinate with your UK accountant rather than giving UK tax advice ourselves. Get the UK side agreed before you rely on UAE rates.

The common errors are procedural rather than technical.

A one-person consultancy in a free zone with modest revenue has to decide, with its accountant, whether to seek qualifying free zone person status or elect Small Business Relief. Because the two generally cannot be combined, the accountant compares the income sources, audit requirements and substance position. In many small cases, electing Small Business Relief under the standard regime is simpler; in others, the free zone regime is more suitable. Either way, the company registers, keeps records and files on time.

If you remain UK tax resident, UK tax may apply to income you receive from a UAE company, and the company itself may be UK resident if it is centrally managed and controlled from the UK. UAE rates do not override UK rules. Speak to a UK adviser.