UAE CorporateTax Guide

The UAE introduced corporate tax in June 2023 — ending decades of zero corporate taxation. For UK business owners who have moved (or are planning to move) to Dubai, understanding the new regime is essential. The good news: at 9%, it remains far lower than the UK's 25% Corporation Tax rate. And for free zone businesses serving overseas clients, it can still be 0%.

This guide explains the UAE corporate tax system from a UK business owner's perspective. We cover the 9% rate, the AED 375,000 threshold, Small Business Relief, Qualifying Free Zone Person (QFZP) status, what counts as taxable income, filing deadlines, transfer pricing basics, and how UAE tax interacts with UK Corporation Tax.

How Does UAE Corporate Tax Work?

The UAE corporate tax applies to all businesses operating in the UAE — including free zone companies, mainland companies, and foreign entities with a permanent establishment in the UAE. It replaced a system where only oil companies and foreign banks paid corporate tax.

The rate structure

For comparison with the UK: UK Corporation Tax is 25% on profits over £250,000 (19% marginal rate below £50,000). A UAE company paying 9% saves 16 percentage points on every pound of profit above the threshold. On £200,000 of taxable profit, that is roughly £32,000 in annual savings.

What Counts as Taxable Income in the UAE?

UAE corporate tax is based on accounting profit (as per IFRS or applicable accounting standards), adjusted for specific tax rules. The starting point is your profit and loss statement.

Key adjustments include:

• Allowable deductions: all business expenses incurred wholly and exclusively for the business are deductible — salaries, rent, marketing costs, professional fees, travel, software subscriptions
• Non-deductible expenses: fines and penalties, donations to non-qualifying entities, entertainment expenses exceeding 50% of total entertainment spend, and payments to connected persons that are not at arm's length
• Exempt income: dividends from UAE companies, capital gains from UAE shareholdings (subject to conditions), and income from personal investments held by natural persons

Personal income: there is no personal income tax in the UAE. Salary, dividends, and other personal income remain tax-free. Corporate tax only applies at the business entity level.

What Is Small Business Relief in the UAE?

Small Business Relief is a transitional measure designed to ease smaller businesses into the corporate tax system. If your total revenue is AED 3 million or less (approximately £660,000), you can elect to be treated as having zero taxable income for that tax period.

This means:

• No corporate tax is payable
• Simplified record-keeping requirements
• You still need to register with the FTA and file a return, but the calculations are minimal

Eligibility conditions:

• Revenue must not exceed AED 3 million in the relevant tax period
• You must not be a Qualifying Free Zone Person (you choose one or the other)
• You must not be part of a Multinational Enterprise Group
• Available for tax periods starting on or before 31 December 2026
• The election must be made in your corporate tax return

What Is a Qualifying Free Zone Person (QFZP)?

QFZP status is the main tax advantage available to free zone companies. If you qualify, your qualifying income is taxed at 0% instead of 9%.

Conditions to qualify

De minimis threshold

If your non-qualifying income (income from mainland UAE customers) does not exceed the lower of AED 5 million or 5% of total revenue, you can still maintain QFZP status. This is important: occasional UAE-based client work will not disqualify you, as long as it stays under this threshold.

If non-qualifying income exceeds the de minimis, all your income loses QFZP treatment for that tax period — not just the non-qualifying portion. This is a cliff-edge, not a sliding scale.

Transfer Pricing Basics

Transfer pricing rules apply to transactions between related parties and connected persons. For UK agency owners, this typically means transactions between your UAE company and your UK company (if you still have one).

The core rule is the arm's length principle: prices charged between related parties must be what unrelated parties would agree to in a comparable transaction. HMRC applies the same principle in the UK.

Common scenarios for agency owners:

• Management fees: if your UAE company charges your UK company a management fee (or vice versa), it must be at market rate
• Intercompany services: if your UK team does work for UAE clients (or UAE team for UK clients), the intercompany charge must reflect market value
• IP licensing: if intellectual property (brand, software, processes) is held in one entity and used by another, a licence fee at arm's length is required

Documentation requirement: businesses with revenue over AED 200 million must maintain a Master File and Local File. Smaller businesses should still document their transfer pricing methodology — the FTA can request it during an audit.

When Is the UAE Corporate Tax Filing Deadline?

Example: if your financial year ends 31 December 2025, your first corporate tax return is due by 30 September 2026. Payment of any tax owed is due by the same date.

How UAE Corporate Tax Interacts with UK Corporation Tax

If you have companies in both the UK and UAE, you need to understand how the two tax systems interact.

The UK–UAE double tax treaty

The UK and UAE have a double tax treaty (DTT) that prevents the same income being taxed twice. Key provisions:

• Business profits: profits of a UAE company are only taxable in the UAE, unless the company has a UK permanent establishment
• Dividends: dividends paid from a UAE company to a UK company are generally exempt from UAE withholding tax (the UAE has no withholding tax regime). In the UK, dividends from overseas subsidiaries can be exempt under the Substantial Shareholding Exemption
• Tax credits: if income is taxed in both jurisdictions, the DTT provides credit relief — UAE tax paid reduces the UK tax liability on the same income

Common structures for UK agency owners in Dubai

Worked Example: UK vs UAE Tax on £200k Profit

How to Register for UAE Corporate Tax

All UAE businesses must register with the Federal Tax Authority (FTA) for corporate tax, even if no tax is payable. The process is straightforward:

1. Create an account on the FTA's EmaraTax portal
2. Submit your company details (trade licence number, free zone, activity type)
3. Provide shareholder and director information
4. Receive your Tax Registration Number (TRN)
5. File annual returns within 9 months of your financial year end

Most free zone companies can complete registration within 1–2 weeks. Your accountant can handle this as part of the company setup process.

What Are the Most Common UAE Corporate Tax Mistakes?

Next Steps

1. Register with the FTA — this is mandatory for all UAE businesses, regardless of income level
2. Determine your QFZP eligibility — if you are in a free zone with overseas clients, you likely qualify for 0%
3. Set up proper accounting — UAE corporate tax is based on accounting profit, so accurate books are essential
4. Appoint a UAE auditor — QFZPs need audited financial statements. Budget AED 5,000–15,000 per year
5. Plan your UK exit — understand the Statutory Residence Test and choose the right company structure

Frequently Asked Questions