Corporate Tax (CT) in the UAE is a direct tax levied on a company's taxable income, calculated by deducting all expenses from income or profit.

On December 9th, 2022, the Federal Tax Authority (FTA) introduced the CT law through Federal Decree Law No. 47/2022, which came into effect on June 1st, 2023.

This new tax regulation likely contributed to the UAE's successful removal from the "grey list" of countries under increased monitoring for money laundering. The UAE had been on this list since March 2022, with the Financial Action Task Force (FATF) expressing concerns about potential money laundering and terrorism financing through banks, precious metals and stones, and real estate sectors. This listing had negatively impacted the country's reputation, reduced investment, and created challenges for entrepreneurs conducting international business from the UAE.

Here are the actions taken by the UAE authorities:

1. Enhanced legislation, including the Corporate Tax law, to improve transparency and tighten financial controls.
2. Established a specialized court to expedite money laundering cases.
3. Strengthened audits by requiring banks and financial institutions to conduct more thorough customer screenings and report suspicious transactions.

These efforts paid off in 2024 when the UAE achieved its goal of being removed from the list. FATF president Raja Kumar acknowledged that the country had "taken substantial steps" to enhance its financial crime-fighting system. Bhavin Shah, a Dubai-based financial crime expert, noted that the UAE's removal from the list "restores the global business community's trust in the UAE to have a robust framework to fight financial crimes."

In the UAE, Corporate Tax is straightforward:

• companies pay 9% tax on yearly taxable income above AED 375,000;
• income up to AED 375,000 is tax-free (0% rate);
• and there is a long list of reliefs and exemptions for various businesses — we’ll talk about it later in this article.

This system keeps the UAE business-friendly. The low tax rate and tax-free allowance encourages companies to set up and grow in the Emirates.

1. Anyone conducting “entrepreneurial activity” must register for Corporate Tax, and the fine for late registration is AED 10,000.

Yes, even if you’re a “natural person”, for example, freelancer. Yes, even if your revenue is zero. Yes, even if all your sales are outside the UAE.
Your registration deadline depends on when your Trade License was issued:

3. All business owners, entrepreneurs, and freelancers must file a Corporate Tax report and pay the tax after each reporting period.

Otherwise — yes, you’ve guessed it right — the fine will be from AED 500 for every month of delay.
You'll pay 9% tax on income above AED 375,000. Income below this amount isn't taxed, but you still need to file a report to confirm your zero tax status.

Corporate Tax in the UAE applies to both Mainland and Free Zone companies, affecting businesses of all sizes and turnover levels. The standard corporate tax rate is 9% on taxable income above AED 375,000, while income up to this threshold is subject to a 0% rate.

Here are the good news: there are some exceptions. Let's have a look into them.

Figuring out how much Corporate Tax you owe in the UAE is pretty straightforward. First, you start with your company's profit or loss from your financial books. Then, you make some adjustments based on the tax rules. This gives you your "taxable income."

The good news is, you don't pay any tax on the first AED 375,000 of this income. For anything above that, you pay 9% tax. Let's break it down with an example:

Say your company's taxable income is AED 500,000. You don't pay tax on the first AED 375,000. So, you only pay 9% tax on the remaining AED 125,000 (that's 500,000 minus 375,000). Your tax bill would be AED 11,250 (9% of 125,000). Even if you make less than AED 375,000 and don't owe any tax, you still need to register and file a tax return. It's all part of keeping things transparent and organized.

We also have a more detailed article with the full formula for calculating corporate taxes.

Remember that your accounting records need to be in line with FTA and IFRS rules, otherwise you could face a fine of up to AED 20,000.

This applies to everyone, companies as well as freelancers and individuals. We have helped more than 100 companies with their bookkeeping, and happy to support you too. 😉

If you want to learn more about corporation tax, here are some helpful links:
The full list of corporate tax exemptions
How to calculate corporate tax
Corporate Tax Guide by FTA