How to Calculate Corporate Tax in UAE: 2026 Guide

What UAE corporate tax actually taxes

Corporate tax in the UAE was introduced by Federal Decree-Law No. 47 of 2022 and applies to financial years starting on or after 1 June 2023. It is a tax on business profit, which trips a lot of owners up, because most small businesses are used to thinking in terms of VAT, where the calculation runs off sales.

The starting point is your accounting net profit for the financial year, taken from properly prepared financial statements. You then make a set of adjustments, add back things the law does not let you deduct, remove income that is exempt, and arrive at taxable income. The rate is applied to that figure, not to revenue.

Mainland companies, free zone companies and natural persons running a business can all fall inside the regime. A natural person conducting business activity in the UAE only comes into scope once turnover from that activity exceeds AED 1,000,000 in a Gregorian calendar year. A free zone company can still qualify for a 0% rate on qualifying income if it meets the Qualifying Free Zone Person conditions, but it must still register and file.

This is general information and the rules change. Confirm current rules with the Federal Tax Authority (FTA) or a qualified local tax professional before acting on anything here.

The rates and thresholds you need in front of you

The AED 375,000 nil band and the AED 375,000 VAT registration threshold are the same number by coincidence of policy design. They are different taxes, different tests and different returns. Do not use one to answer the other.

• 0% on the portion of taxable income up to and including AED 375,000.
• 9% on the portion of taxable income above AED 375,000.
• Small Business Relief: if revenue in the current and all previous tax periods is AED 3,000,000 or less, an eligible resident person can elect to be treated as having no taxable income. This relief is available for tax periods ending on or before 31 December 2026.
• Qualifying Free Zone Persons: 0% on qualifying income and 9% on non-qualifying income, subject to strict substance, de minimis and audited accounts conditions.
• Large multinational groups with consolidated revenue at or above EUR 750 million fall under the Domestic Minimum Top-up Tax at an effective 15% rate for financial years starting on or after 1 January 2025. Almost no SME is affected by this.
• Corporate tax is separate from VAT. VAT stays at 5%, with mandatory registration at AED 375,000 of taxable supplies and voluntary registration at AED 187,500, filed on the VAT201 return.

Step by step: calculating your corporate tax

1. 1

   Fix your tax period

   Your tax period is normally your financial year, usually 1 January to 31 December unless you have chosen a different year end. Every figure below must come from that same twelve month window, so close your books for the period before you start.

2. 2

   Start from accounting net profit

   Take the net profit or loss shown in your financial statements, prepared under IFRS. Businesses with revenue of AED 50 million or less may use IFRS for SMEs, and businesses with revenue of AED 3 million or less may use the cash basis of accounting. If your books are a spreadsheet and a shoebox of receipts, this step is where the whole calculation falls apart, so fix the bookkeeping first.

3. 3

   Add back expenses the law does not allow

   Common add-backs include administrative fines and penalties, bribes and illicit payments, donations to bodies that are not approved public benefit entities, dividends and profit distributions to owners, corporate tax itself, and recoverable input VAT. Also add back 50% of entertainment expenditure incurred on customers, suppliers and other business contacts, because only half is deductible.

4. 4

   Remove exempt and non-taxable income

   Deduct income that the law exempts, such as qualifying dividends and profit distributions received from UAE resident companies, and gains covered by the participation exemption. If you have foreign branch income or income already dealt with under another rule, treat it separately rather than leaving it in the pot.

5. 5

   Apply the specific limitation rules

   Net interest expenditure is generally capped at 30% of adjusted EBITDA, with a de minimis of AED 12 million below which the cap does not bite. Transactions with related parties and connected persons must be priced at arm's length, and payments to owners or their relatives must be at market value to be deductible. Most owner managed SMEs are caught here by an above market director salary or a family rent charge.

6. 6

   Offset any carried forward tax losses

   Tax losses can be carried forward indefinitely, but the offset in any tax period is limited to 75% of taxable income before the loss relief, and continuity of ownership conditions apply. Deduct the allowable loss to arrive at your final taxable income.

7. 7

   Apply the bands

   Charge 0% on the first AED 375,000 of taxable income and 9% on the excess. If you are eligible for and elect Small Business Relief, you instead report nil taxable income for the period, and you cannot use losses or the interest cap carry forward generated in that period.

8. 8

   Deduct credits, then file and pay

   Reduce the liability by any available foreign tax credit or withholding tax credit. File the corporate tax return and pay the balance within nine months of the end of your tax period, through the FTA's EmaraTax portal. A year ending 31 December 2025 is due by 30 September 2026.

A worked example you can copy

Take a Dubai retail company with a 31 December year end and revenue of AED 4.2 million, so Small Business Relief is not available.

Accounting net profit for the year is AED 600,000. During the year the business paid AED 5,000 in traffic and municipality fines, and spent AED 20,000 entertaining suppliers and customers.

Add back the AED 5,000 of fines in full. Add back 50% of the entertainment, which is AED 10,000. There is no exempt income and no brought forward loss. Taxable income becomes AED 600,000 plus AED 15,000, which is AED 615,000.

Now apply the bands. The first AED 375,000 is taxed at 0%, giving nil. The remaining AED 240,000 is taxed at 9%, giving AED 21,600. That is the corporate tax payable for the year, due by 30 September of the following year.

Notice how small the add-backs were and how much they mattered. AED 15,000 of disallowed spend cost AED 1,350 in tax. That is why the categorisation in your books, not a clever year end calculation, is what actually determines your bill. Again, this is general information, so confirm your own numbers with the FTA or a qualified local tax professional.

Registration, filing and the records the FTA expects

Small Business Relief is not automatic. You still register, you still file a return, and you make the election on that return. Owners who assume the relief means they can ignore the regime are the ones who end up paying the AED 10,000 late registration penalty.

• Every taxable person must register for corporate tax with the FTA through EmaraTax and obtain a Corporate Tax Registration Number, even if the result is nil tax.
• Registration deadlines are set by FTA Decision No. 3 of 2024 and depend on your licence issue month or, for natural persons, on when you crossed the AED 1,000,000 turnover mark. Late registration carries an administrative penalty of AED 10,000.
• One return per tax period, filed within nine months of the period end. There are no quarterly corporate tax instalments.
• Records supporting the return must be kept for seven years after the end of the tax period they relate to.
• Financial statements generally need to be audited where revenue exceeds AED 50 million, and Qualifying Free Zone Persons must maintain audited financial statements regardless of size.
• Related party transactions may need a disclosure form, and full transfer pricing documentation applies at much higher revenue thresholds than most SMEs reach.

Where the calculation usually goes wrong for small businesses

• Mixing personal and business spending on one card, so groceries and school fees sit in the profit and loss and have to be stripped out later.
• Treating owner drawings as an expense. Distributions are not deductible, and taking a salary from a company you own has its own arm's length rules.
• Losing receipts, so a legitimate deduction cannot be evidenced when the FTA asks for it seven years later.
• Forgetting the 50% entertainment restriction, which is easy to miss because the spend looks like ordinary business hospitality.
• Assuming a free zone licence means 0% with no conditions. The Qualifying Free Zone Person test is narrow and non-qualifying revenue is taxed at 9%.
• Running stock and sales in a POS that never talks to the accounts, so cost of goods sold is estimated rather than calculated, and profit is wrong before the tax adjustments even start.

Getting your books to produce the number for you

The honest answer to how you calculate UAE corporate tax is that you do not calculate it at year end. You keep books clean enough during the year that the profit figure is already right, and then you make a short list of adjustments on top.

That is what Tallium AI is built for. It is one app rather than a stack: accounting, invoicing, bank reconciliation, VAT and tax handling, POS, inventory, e-commerce, plus the Tallium AI suite's Marketing and CRM tools, all under a single account. Sales made at the till flow into the ledger, stock movements produce a real cost of goods sold, and receipts are scanned, read and categorised by AI, so the expenses that decide your add-backs are coded correctly the day they happen instead of the week before filing.

Reports give you profit and loss on demand, so you can see roughly where you sit against the AED 375,000 nil band and the AED 3 million Small Business Relief revenue test months before the deadline rather than after it. AI insights flag the unusual movements worth a second look.

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Software gives you accurate numbers. It does not give you tax advice. Confirm your position with the Federal Tax Authority or a qualified local tax professional.