UAE Corporate Tax Rates Explained with Examples
Understanding UAE corporate tax rates is essential for businesses operating in the UAE to ensure accurate compliance, tax planning, and financial forecasting. With the introduction of federal corporate tax, businesses must clearly understand how the 0% and 9% tax rates apply and how corporate tax calculation UAE works in real scenarios.
This guide explains UAE corporate tax rates in simple terms, covers free zone tax treatment, and includes worked examples to help businesses calculate their corporate tax correctly.
👉 For a complete compliance overview, read our Company Tax in UAE – Complete Corporate Tax Guide
UAE Corporate Tax Rates
What Are the UAE Corporate Tax Rates?
The UAE applies two corporate tax rates depending on taxable income:
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0% corporate tax on taxable income up to AED 375,000
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9% corporate tax on taxable income exceeding AED 375,000
These UAE corporate tax rates are designed to support small businesses and startups while ensuring fair taxation for higher-profit companies.
0% vs 9% Corporate Tax in UAE Explained
✅ 0% Corporate Tax Rate
The 0% rate applies to:
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Taxable income up to AED 375,000
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Certain qualifying free zone income
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Government entities and qualifying public benefit entities (subject to conditions)
This threshold ensures that SMEs and new businesses are not overburdened in the early stages.
Source: Federal Tax Authority Of UAE
✅ 9% Corporate Tax Rate
The 9% corporate tax rate applies to:
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Taxable income above AED 375,000
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Non-qualifying income of free zone companies
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Foreign entities with taxable UAE presence
The 9% rate is among the lowest corporate tax rates globally, maintaining the UAE’s competitiveness as a business hub.
UAE Corporate Tax Rates for Free Zone Companies
Free zone companies are not automatically exempt from corporate tax.
Free Zone Tax Treatment Explained:
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Registration for corporate tax is mandatory
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0% tax rate applies only to qualifying income
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9% tax rate applies to non-qualifying income
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Economic substance and transfer pricing rules must be followed
Failure to meet qualifying conditions may result in the standard 9% tax being applied.
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Corporate Tax Calculation UAE – Worked Examples
Understanding corporate tax calculation UAE becomes easier with practical examples.
📌 Example 1: Mainland Company
Annual taxable profit: AED 500,000
| Portion | Tax Rate | Tax |
|---|---|---|
| First AED 375,000 | 0% | AED 0 |
| Remaining AED 125,000 | 9% | AED 11,250 |
✅ Total corporate tax payable: AED 11,250
📌 Example 2: Small Business Below Threshold
Annual taxable profit: AED 300,000
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Entire income taxed at 0%
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Corporate tax payable: AED 0
Registration and return filing are still mandatory.
📌 Example 3: Free Zone Company (Mixed Income)
Qualifying income: AED 400,000
Non-qualifying income: AED 200,000
| Income Type | Tax Rate | Tax |
|---|---|---|
| Qualifying income | 0% | AED 0 |
| Non-qualifying income | 9% | AED 18,000 |
✅ Total corporate tax payable: AED 18,000
Why Accurate Corporate Tax Calculation Matters
Incorrect corporate tax calculation UAE can result in:
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Underpayment penalties
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Overpayment and cash flow issues
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Increased audit risk
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Non-compliance notices from the FTA
Maintaining accurate financial records and calculations is essential.
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FAQs – UAE Corporate Tax Rates
What are the current UAE corporate tax rates?
The UAE corporate tax rates are 0% on taxable income up to AED 375,000 and 9% on income above that threshold.
Is the 0% tax rate automatic for all businesses?
No. Businesses must register for corporate tax and meet qualifying conditions, especially free zone entities.
Do free zone companies pay 9% corporate tax?
Free zone companies pay 9% tax on non-qualifying income only, while qualifying income may be taxed at 0%.
Is corporate tax calculated on revenue or profit?
Corporate tax is calculated on taxable profit, not total revenue.
Do I need to file a return if my tax rate is 0%?
Yes. Even if no tax is payable, annual return filing is mandatory.
Final Thoughts
Understanding UAE corporate tax rates and applying accurate corporate tax calculation UAE is crucial for every business operating in the UAE. With clear thresholds, free zone considerations, and strict compliance requirements, businesses must plan carefully to avoid penalties.
For accurate calculations, proper record-keeping, and compliance peace of mind, professional accounting support makes a measurable difference.
👉 Read the full compliance guide: Company Tax in UAE
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