What is the corporate tax rate for a small business in the UAE?

Under Federal Decree-Law No. 47 of 2022, UAE corporate tax is 0 percent on taxable income up to AED 375,000 per financial year and 9 percent on taxable income above that amount. The 0 percent band always applies to the first AED 375,000 of profit. There is no personal income tax in the UAE. The tax applies to financial years starting on or after 1 June 2023.

What is Small Business Relief and who qualifies for it?

Ministerial Decision No. 73 of 2023 allows resident taxable persons with total revenue not exceeding AED 3 million to elect to be treated as having zero taxable income for that period. The election is made annually through the EmaraTax portal. It applies to tax periods ending on or before 31 December 2026. Qualifying Free Zone Persons and members of large multinational enterprise groups are excluded from this relief.

Can a free-zone business in the UAE pay 0% corporate tax?

A Qualifying Free Zone Person (QFZP) pays 0 percent corporate tax on Qualifying Income from activities such as trading with non-UAE persons, manufacturing, and qualifying intellectual property. Non-Qualifying Income is taxed at 9 percent. To maintain QFZP status the entity must have adequate substance in the free zone, prepare IFRS-audited accounts, and ensure non-qualifying revenue stays within the de minimis limits set by the FTA.

Does the UAE have VAT, and when must a small business register?

Yes. The UAE imposes VAT at 5 percent on most taxable supplies. Mandatory VAT registration is required once taxable supplies and imports exceed AED 375,000 in any rolling 12-month period. Voluntary registration is available from AED 187,500. Failure to register within 30 days of reaching the mandatory threshold carries a fixed penalty of AED 10,000 under FTA enforcement rules.

What is the Domestic Minimum Top-up Tax (DMTT) and does it affect my small business?

Cabinet Decision No. 142 of 2024 introduced a 15 percent Domestic Minimum Top-up Tax for constituent entities of multinational enterprise groups with consolidated global revenue of at least EUR 750 million, effective for financial years starting on or after 1 January 2025. The DMTT is a large-MNE measure implementing OECD Pillar Two rules. The vast majority of UAE small businesses -- those below the EUR 750 million group-revenue threshold -- are unaffected.

Small Business Tax in United Arab Emirates — Rates, Rules & Filing

The United Arab Emirates introduced a federal corporate tax for the first time in its modern history, effective for financial years starting on or after 1 June 2023. The framework is set out in Federal Decree-Law No. 47 of 2022 on the Taxation of Corporations and Businesses and is administered by the Federal Tax Authority (FTA). For most small businesses the regime operates at one of two rates: 0 percent on taxable income up to AED 375,000 (approximately USD 102,000) and 9 percent on taxable income above that threshold. There is no personal income tax in the UAE, and Value Added Tax (VAT) applies at 5 percent under a separate framework. United Arab Emirates country overview

What corporate tax rate applies to small businesses?

Federal Decree-Law No. 47 of 2022 establishes a two-tier rate structure. Taxable income up to AED 375,000 in a financial year is charged at 0 percent. Taxable income exceeding that amount is charged at 9 percent on the portion above the threshold -- the portion below AED 375,000 always remains at 0 percent. The tax applies to UAE-resident juridical persons (limited liability companies, joint-stock companies, and similar entities), natural persons conducting business activity with annual revenue above AED 1 million, and non-resident persons with a UAE permanent establishment or UAE-source income. Government entities, qualifying investment funds, qualifying public pension funds, and entities subject to emirate-level resource-extraction taxation are exempt from the federal corporate tax. [1]

What is Small Business Relief and how does a business elect it?

Ministerial Decision No. 73 of 2023, issued under Article 21 of the Corporate Tax Law, established Small Business Relief (SBR). A resident taxable person -- whether a natural person or a juridical entity -- whose total revenue in the current tax period does not exceed AED 3,000,000 (three million dirhams) may elect to be treated as having derived no taxable income for that period, effectively reducing corporate tax liability to zero regardless of actual profit. The election must be made actively through the FTA EmaraTax portal at the time of filing; it is not applied automatically. The relief is available for tax periods starting on or after 1 June 2023 and ending on or before 31 December 2026. [2]

Two categories are excluded from SBR: Qualifying Free Zone Persons (who have a separate 0 percent pathway under the free-zone regime) and members of multinational enterprise groups whose consolidated global revenue exceeds AED 3.15 billion. Critically, the AED 3 million threshold is assessed across current and all prior tax periods -- if a business exceeded AED 3 million in any previous period, it loses SBR eligibility for the current period even if revenue has since fallen below the threshold. With the sunset date of 31 December 2026 approaching, businesses approaching or near the AED 3 million revenue band should consult a qualified UAE tax professional before that deadline. [2]

How does free-zone status affect corporate tax?

UAE free zones -- more than 40 across the seven emirates, including the Dubai Multi Commodities Centre, Jebel Ali Free Zone, Dubai International Financial Centre, and Abu Dhabi Global Market -- offer a distinct tax pathway. A juridical person incorporated in a qualifying free zone that meets all conditions to be a Qualifying Free Zone Person (QFZP) is taxed at 0 percent on its Qualifying Income and at 9 percent on non-Qualifying Income. [3]

The QFZP conditions set by the FTA require the entity to: maintain adequate economic substance within the free zone (sufficient qualified employees and operating expenditure); derive income from qualifying activities (trading with non-UAE persons, manufacturing, intellectual property exploitation, fund management, aircraft financing, and related categories); comply with transfer-pricing rules for related-party transactions; and prepare audited financial statements under IFRS. Non-qualifying revenue that exceeds the lower of 5 percent of total revenue or AED 5 million disqualifies the entity from QFZP status for that period. In August 2025 the Ministry of Finance issued Ministerial Decisions 229 and 230 (retroactive to 1 June 2023) broadening qualifying-activity categories for commodity traders. [3]

What is the Domestic Minimum Top-up Tax for large multinationals?

Cabinet Decision No. 142 of 2024 introduced a Domestic Minimum Top-up Tax (DMTT) effective for financial years starting on or after 1 January 2025. The DMTT applies only to constituent entities of multinational enterprise groups whose consolidated annual global revenue meets or exceeds EUR 750 million in at least two of the four preceding financial years. Where the effective tax rate of an in-scope UAE entity falls below 15 percent, the DMTT tops it up to that minimum -- aligning the UAE with the OECD/G20 Pillar Two GloBE rules. The DMTT does not affect the vast majority of UAE small businesses; it is a large-MNE measure. Registration and filing are handled through the FTA. [4]

What VAT obligations apply to UAE businesses?

The UAE introduced VAT in January 2018 at a standard rate of 5 percent on taxable supplies of goods and services. Corporate tax and VAT are separate obligations administered by the FTA under distinct frameworks. A business must register for VAT when its taxable supplies and imports exceed the mandatory threshold of AED 375,000 in any rolling 12-month period, or where it is anticipated they will exceed that amount within the next 30 days. Voluntary registration is available once taxable supplies exceed AED 187,500. [5] Certain categories -- including most financial services, residential property sales, and local passenger transport -- are exempt or zero-rated under Federal Decree-Law No. 8 of 2017.

Tax	Rate	Threshold / Scope	Effective
Corporate tax -- lower band	0%	Taxable income up to AED 375,000 per year	FY starting 1 Jun 2023
Corporate tax -- upper band	9%	Taxable income above AED 375,000	FY starting 1 Jun 2023
Small Business Relief (elective)	0% on all taxable income	Revenue does not exceed AED 3 million; ends 31 Dec 2026	FY starting 1 Jun 2023
Free-zone Qualifying Income	0%	QFZP conditions met; qualifying activities only	FY starting 1 Jun 2023
VAT -- standard rate	5%	Taxable supplies and imports above AED 375,000	1 Jan 2018
Personal income tax	0%	No personal income tax in UAE	N/A
DMTT (large MNEs only)	15% minimum ETR	MNE groups with consolidated revenue >= EUR 750 million	FY starting 1 Jan 2025

Registration for corporate tax is handled through the FTA's EmaraTax digital portal. Resident juridical persons incorporated on or after 1 March 2024 must register within three months of the date of incorporation. Natural persons who conducted a business activity in the UAE during 2024 and whose revenue exceeded AED 1 million by 31 July 2024 were required to register by 31 March 2025. Late registration carries an administrative penalty of AED 10,000. Annual corporate tax returns must be filed within nine months of the end of the relevant financial year. [6]

Tax rules interact with corporate structure, free-zone licensing conditions, and individual circumstances in ways that vary materially from business to business. Businesses seeking to understand their specific corporate tax position, Small Business Relief eligibility, or QFZP qualification should consult a qualified UAE tax professional. The United Arab Emirates country overview page lists vetted UAE-qualified practitioners.

Small Business Tax in United Arab Emirates

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