UAE Corporate Tax 2025: Rates, Free Zone Rules, Small Business Relief, and Pillar Two

The UAE corporate tax system applies 0% on taxable profits up to AED 375,000 and 9% above that, in force for financial years starting on or after 1 June 2023; free zone companies can keep 0% on qualifying income if they meet substance, audited financials, and de‑minimis tests, while eligible small businesses with revenue up to AED 3 million can elect Small Business Relief through 31 Dec 2026, and large multinationals face a 15% Domestic Minimum Top‑Up Tax from 2025 under OECD Pillar Two.​

Contact our UAE corporate tax specialists today for a comprehensive compliance review and discover how we can transform your tax obligations into strategic advantages.

Who pays and when

Corporate tax applies to financial years starting on or after 1 June 2023, covering UAE‑resident companies and certain non‑residents with a UAE permanent establishment or UAE‑sourced income; exemptions apply for specific government entities and qualifying natural resource activities, and everyone in scope must register with the Federal Tax Authority and file one annual return within nine months of year‑end.​

Tax rates at a glance

The standard rate is 0% on taxable profits up to AED 375,000 and 9% on the amount above that threshold, while certain foreign bank branches may remain under legacy Emirate‑level rules, and from 2025 large multinational groups face a Domestic Minimum Top‑Up Tax to reach a 15% effective rate under OECD Pillar Two.​

How profit is calculated

Tax starts from accounting net profit prepared under IFRS or IFRS for SMEs and then adjusts for items prescribed by law, so keep clean books, track add‑backs and deductions, and maintain proper transfer pricing documentation for related‑party and connected‑person transactions to meet arm’s‑length standards.​

Free zone 0% option

A Qualifying Free Zone Person can keep a 0% rate on qualifying income if it has adequate substance in the free zone, audited financial statements, compliant transfer pricing files, and stays within the de‑minimis cap for non‑qualifying income; income that does not meet the tests is taxed at 9%, and breaching conditions can cause loss of the 0% benefit.​

What counts as qualifying income

Qualifying income generally includes defined activities and transactions with foreign persons or other free zone persons, while most supplies to UAE mainland customers become non‑qualifying unless routed through permitted channels, so map each revenue stream and monitor the de‑minimis threshold (lower of 5% of total revenue or AED 5 million).​

Small Business Relief (SBR)

Resident businesses with revenue at or below AED 3 million for the current and all prior relevant periods can elect SBR for periods starting on/after 1 June 2023 and ending on/before 31 December 2026, treating taxable income as zero for that period, but they must keep supporting records and consider interactions with losses, interest caps, and transfer pricing.​

Groups, losses, and consolidation

Losses can be carried forward subject to ownership and continuity rules, group relief and tax group consolidation are available if conditions are met, and groups should model effects on SBR eligibility, free zone status, deferred tax, and Pillar Two exposure before electing.​

Pillar Two and top‑up tax

Multinational groups with consolidated revenue of at least EUR 750 million in two of the last four years must prepare effective tax rate calculations and may owe a Domestic Minimum Top‑Up Tax to reach 15% in the UAE starting 2025, which also helps reduce foreign top‑up exposure.​

Filing and records

Register on the FTA portal, maintain audited financials if required, file the annual corporate tax return within nine months of the end of the financial year, and keep transfer pricing master file and local file where thresholds apply to safeguard positions, especially for free zone qualification.​

Quick examples

A mainland SME with AED 900,000 taxable profit pays 0% on AED 375,000 and 9% on AED 525,000, and if revenue is ≤ AED 3 million and SBR is elected, taxable income can be treated as zero for eligible years through 2026, while a compliant free zone company selling only to foreign or free‑zone customers may keep 0% on qualifying income but will pay 9% on non‑qualifying mainland income.​

📞 Ready to ensure your corporate tax strategy positions your business for success in the evolving UAE landscape?

Contact our UAE corporate tax specialists today for a comprehensive compliance review and discover how we can transform your tax obligations into strategic advantages.

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