UAE corporate tax guide for SMEs

UAE corporate tax for SMEs: who pays, the 0%/9% rates, SBR to 2029, registration, the 9-month return, computation, transfer pricing and penalties.

At a glance

Corporate tax now applies to almost every UAE business, including many that will owe nothing. This guide explains who must register, how the 0% and 9% rates work, when Small Business Relief helps, and how to get from accounting profit to the figure on your return.

0% on the first AED 375,000 of taxable income, 9% on the rest.

Small Business Relief (revenue up to AED 3m) now runs to tax periods ending by 31 Dec 2029 (MD 131/2026).

New companies register within 3 months of incorporation; late registration costs AED 10,000.

File the return and pay within 9 months of your financial year end: 30 Sep 2027 for FY2026.

Individuals are taxable only if business turnover exceeds AED 1m in a calendar year.

Keep corporate tax records for 7 years after the end of each tax period.

Key dates

30 Sep 2026: FY2025 return and payment deadline (calendar-year companies)

3 months: Registration deadline for a company incorporated on or after 1 Mar 2024

31 Mar 2027: Registration for individuals whose 2026 business turnover exceeded AED 1m

30 Sep 2027: FY2026 return and payment deadline (calendar-year companies)

31 Dec 2029: Last tax period end date eligible for Small Business Relief

Who has to deal with corporate tax

Corporate tax applies under Federal Decree-Law 47/2022 for financial years starting on or after 1 June 2023. The short answer to "does it apply to me?" is almost always yes, even if the tax you end up paying is zero.

UAE companies: every juridical person incorporated in the UAE, on the mainland or in a free zone.

Foreign companies effectively managed and controlled in the UAE, and non-residents with a permanent establishment or a UAE nexus (for example income from UAE real estate).

Individuals running a business: a natural person is taxable only if business turnover exceeds AED 1,000,000 in a calendar year (Cabinet Decision 49/2023). Salary, personal investment income and personal real-estate investment income do not count.

Some bodies are Exempt Persons (government entities, qualifying public benefit entities, qualifying investment and pension funds, among others), but they may still need to register and file a declaration.

Rates: 0% and 9%, with a worked example

For a normal mainland company the rate structure is simple (Art 3; Cabinet Decision 116/2022):

Taxable income | Rate

First AED 375,000 | 0%

Above AED 375,000 | 9% on the excess only

Qualifying Free Zone Person: qualifying income | 0%

Qualifying Free Zone Person: non-qualifying income | 9% (no AED 375,000 band)

Worked example

A Dubai trading LLC has taxable income of AED 1,000,000. The first AED 375,000 is taxed at 0%. The remaining AED 625,000 is taxed at 9%: 625,000 × 9% = AED 56,250. That is an effective rate of about 5.6%, not 9%.

A company with taxable income of AED 300,000 pays nothing, but it still has to register, file a return and keep records. Try your own figures in the corporate tax calculator.

Small Business Relief: up to AED 3m revenue, now to 2029

Small Business Relief (Art 21; Ministerial Decision 73/2023) lets a resident business elect to be treated as having no taxable income for a tax period. You qualify if revenue is AED 3,000,000 or less in the current tax period and in every previous tax period. Cross AED 3m once and you lose it for good.

The relief was due to end with tax periods ending on 31 Dec 2026. Ministerial Decision 131/2026 (issued 29 Jul 2026) extends it to tax periods that end on or before 31 December 2029. The AED 3m threshold and the exclusions are unchanged. For a calendar-year company, FY2029 is the last year it can be used.

Who cannot use it

Qualifying Free Zone Persons.

Members of multinational groups with consolidated revenue of AED 3.15bn or more.

Anyone who artificially splits a business to stay under the threshold (MD 73/2023 Art 6).

What you give up

In an SBR year, exempt income, reliefs, deductions, loss relief and transfer pricing documentation do not apply. Crucially, tax losses and net interest expenditure from SBR years cannot be carried forward. A start-up that expects losses now and profits later should compare both routes before electing. You must still register, file a return and keep records.

Loss-making year? Run the numbers first: If you made a tax loss of AED 400,000 this year, electing SBR means that loss disappears. Not electing keeps it available to offset up to 75% of future taxable income.

Registration, tax period and filing deadlines

Registration deadlines are set by FTA Decision 3/2024. The catch-up deadlines for companies that existed before 1 March 2024 all passed during 2024, so today the rules that matter are these:

Who | Register by

Resident company incorporated on or after 1 Mar 2024 (incl. free zone) | 3 months from incorporation

Foreign company effectively managed and controlled in the UAE | 3 months from the end of its financial year

Non-resident with a permanent establishment | 6 months from when the PE exists

Non-resident with a UAE nexus | 3 months from the nexus

Resident individual with turnover above AED 1m | 31 March of the following year

Your tax period is your financial year (Art 57). The return and the payment are both due 9 months after the period ends (Arts 48 and 53). For calendar-year companies, FY2025 was due on 30 Sep 2026 and FY2026 is due on 30 Sep 2027. A June year end means a 31 March deadline. See all dates on the tax calendar.

Late registration: AED 10,000: The penalty for late corporate tax registration is AED 10,000 (Cabinet Decision 75/2023). Under an FTA waiver initiative, it is waived (or refunded) if you file the return for your first tax period within 7 months of that period ending. The FTA reported the initiative as still operating in May 2026, but no end date has been published, so confirm with your adviser before relying on it.

From accounting profit to taxable income

Taxable income starts from the net profit in your standalone financial statements (Art 20) and is then adjusted. The main steps for an SME:

Step | Adjustment | Law

1 | Start with accounting net profit before tax | Art 20

2 | Subtract exempt income, e.g. dividends from UAE companies and qualifying foreign dividends and gains | Arts 22-23

3 | Add back 50% of client entertainment (meals, hospitality for customers, suppliers, shareholders, partners) | Art 32

4 | Add back non-deductibles in full: fines and penalties, donations to non-qualifying bodies, bribes, dividends, owner drawings, corporate tax itself, recoverable input VAT posted to expenses | Arts 28, 33

5 | Add back net interest above the higher of AED 12m or 30% of tax-EBITDA (carried forward up to 10 periods) | Art 30; MD 126/2023

6 | Adjust related-party deals to arm's length; cap payments to connected persons at market value | Arts 34-36

7 | Subtract tax losses brought forward, capped at 75% of taxable income | Arts 37-39

8 | Apply 0% / 9% and deduct any foreign tax credit | Arts 3, 47

Worked example

An LLC reports accounting profit of AED 950,000. It spent AED 60,000 entertaining clients (add back 50% = AED 30,000), paid AED 15,000 in traffic and municipality fines (add back in full), gave AED 25,000 to a charity that is not a qualifying public benefit entity (add back) and received a AED 20,000 dividend from a UAE company (subtract). Taxable income = 950,000 + 30,000 + 15,000 + 25,000 − 20,000 = AED 1,000,000, so corporate tax is AED 56,250.

Staff entertainment, such as a team dinner, is outside the 50% rule and fully deductible if it is wholly for the business. The interest cap rarely bites for SMEs: it only matters once net interest exceeds AED 12m.

Losses

If taxable income before losses is AED 400,000 and you carry AED 1,000,000 of losses forward, you can use only AED 300,000 (75%). Taxable income becomes AED 100,000, which falls within the 0% band. You keep the losses only if at least 50% of the ownership stays the same, or the business continues the same or a similar activity.

Transfer pricing and connected persons

Transactions with related parties (50% or more common ownership or control, family members to the fourth degree, partners, branches) must be priced at arm's length (Arts 34-35). Payments to connected persons (owners holding 50% or more, directors and officers, and their related parties) are deductible only up to market value and only if incurred for the business (Art 36). A director's salary well above market rate means the excess is added back.

Requirement | Threshold

Related-party disclosure schedule with the return | Related-party transactions above AED 40m in the period (dividends excluded); each category above AED 4m disclosed

Connected-person disclosure schedule | Payments or benefits to a connected person above AED 500,000

Master file and local file (MD 97/2023) | Entity revenue of AED 200m or more, or group revenue of AED 3.15bn or more; produce within 30 days of an FTA request

Even below these thresholds, keep a short note explaining how each related-party price was set. The disclosure thresholds come from the FTA's corporate tax return guide; check the current form with your adviser.

Records, audits and penalties

Keep the records that support each return for 7 years after the end of the tax period (Art 56). Accounts follow IFRS; IFRS for SMEs is allowed if revenue is AED 50m or less, and the cash basis if revenue is AED 3m or less (Ministerial Decision 114/2023). Audited financial statements are required for corporate tax if revenue exceeds AED 50m, or if you are a Qualifying Free Zone Person whatever your revenue (Ministerial Decision 84/2025). All amounts must be in AED at Central Bank rates (Art 43).

Violation | Penalty (AED)

Late registration | 10,000

Late return | 500 per month for months 1-12, then 1,000 per month

Late payment | 14% per year, charged monthly on the unpaid tax

Failure to keep records | 10,000 (20,000 if repeated within 24 months)

Incorrect return | 500, waived if corrected before the filing deadline

Voluntary disclosure of errors | 1% per month on the difference

Errors found after an audit notice | 15% fixed plus 1% per month

Failure to facilitate an FTA auditor | 20,000

Free zones and large groups

A free zone company can pay 0% on qualifying income if it is a Qualifying Free Zone Person: adequate substance, qualifying income, audited accounts, arm's-length pricing and non-qualifying revenue within the de minimis limit. Fail one condition and you lose the status for that year and the next four. Being in a free zone is not enough on its own; read the free zone corporate tax guide before assuming 0%.

Multinational groups with consolidated revenue of EUR 750m or more face a Domestic Minimum Top-up Tax to a 15% effective rate from 2025 (Cabinet Decision 142/2024); this does not affect typical SMEs.

Checklist: what to do this year

Confirm you are registered and have your corporate tax registration number. New company? Register within 3 months of incorporation.

Note your financial year end and put the 9-month return and payment date in your calendar.

Check revenue for every year since corporate tax started. If it has always been AED 3m or less, decide whether to elect Small Business Relief, weighing any losses you would forfeit.

Make sure recoverable input VAT is not booked as an expense (see the VAT guide).

Tag entertainment, fines, donations and owner drawings in your chart of accounts so the add-backs are easy to compute.

List related parties and connected persons, record how prices and salaries were set, and total the amounts against the AED 40m and AED 500,000 disclosure thresholds.

Check whether you need audited accounts (revenue above AED 50m or Qualifying Free Zone Person).

Set aside cash for the tax: late payment costs 14% a year.

Archive the return, workings and supporting documents for 7 years.

Done right: A clean year end has three things ready before you open the return: final standalone accounts, a one-page bridge from accounting profit to taxable income, and a related-party list. With those, the return itself is the easy part.

How Rami handles this

Layla tracks your registration, return and payment deadlines and reminds you 60, 30 and 7 days ahead.

She checks Small Business Relief eligibility each year against your revenue history and shows you what you give up by electing it.

She drafts the bridge from accounting profit to taxable income, flagging entertainment, fines, input VAT and related-party items for review.

You or your adviser review and approve the draft return before anything is submitted to the Federal Tax Authority.

Sources

Federal Decree-Law 47/2022 (Corporate Tax Law), as amended by Decree-Law 60/2023 and Decree-Law 40/2024

Cabinet Decision 116/2022 (AED 375,000 threshold)

Cabinet Decision 49/2023 (natural persons)

Ministerial Decision 73/2023 (Small Business Relief), as amended by Ministerial Decision 131/2026

FTA Decision 3/2024 (registration deadlines)

Ministerial Decision 126/2023 (general interest deduction limitation)

Ministerial Decision 97/2023 (transfer pricing documentation)

Ministerial Decision 114/2023 (accounting standards)

Ministerial Decision 84/2025 (audited financial statements)

Cabinet Decision 75/2023, as amended by Cabinet Decision 10/2024 (corporate tax penalties)

Cabinet Decision 142/2024 (Domestic Minimum Top-up Tax)

Last updated 2026-10-19. This guide is general information as of October 2026, not legal or tax advice.