Who Needs to Pay Corporate Tax in UAE?
The introduction of federal corporate tax in the UAE has fundamentally reshaped the business landscape, ending decades of tax-free operations for most companies. As we navigate through 2026, understanding who needs to pay corporate tax has become essential for business owners, investors, and entrepreneurs operating in Dubai and across the Emirates.
This comprehensive guide answers the critical question: who is subject to UAE corporate tax? We'll explore which businesses must pay, who is exempt, the special rules for free zone companies, individual income exclusions, and the compliance obligations that apply even when no tax is due.
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Table of Contents
The Fundamental Scope: Who is Subject to Corporate Tax?
The UAE corporate tax applies to all business and commercial activities across all Emirates, with specific exemptions for certain categories of persons and income types.
Core Taxable Persons
| Entity Type | Description | Corporate Tax Status |
|---|---|---|
| Limited Liability Companies (LLC) | Standard UAE mainland company structure | Taxable person |
| Public Joint Stock Companies | Companies listed or unlisted on UAE stock exchanges | Taxable person |
| Private Joint Stock Companies | Companies with private shareholdings | Taxable person |
| Partnerships | Partnerships conducting commercial activities | Taxable person (entity-level tax) |
| Sole Establishments | Single-owner commercial businesses | Taxable person |
| Free Zone Companies | All entities in UAE free zones | Taxable person (0% if qualifying) |
Important Note:
Being a taxable person means you must register with the Federal Tax Authority (FTA), file annual corporate tax returns, and pay any tax due—even if your taxable income falls within the zero-rate band of AED 0 to 375,000.
Foreign Entities with UAE Presence
Foreign entities and individuals conducting trade or business in the UAE in an ongoing or regular manner are subject to corporate tax.
| Presence Type | Tax Treatment | Examples |
|---|---|---|
| Permanent Establishment (PE) | Taxed on PE-attributable income | Foreign company with UAE office or branch |
| UAE-sourced income | Taxed on specific income categories | Foreign company earning UAE rental income |
| Branch of foreign company | Taxed as separate taxable person | Bank branch, insurance company branch |
| Representative office | Generally not taxed (non-commercial) | Marketing office without direct sales |
Who is NOT Subject to Corporate Tax?
Understanding exemptions is equally important for determining your obligations.
Government Entities
- Federal government entities and departments
- Emirate-level government entities
- Government agencies and authorities
- Wholly-owned government entities
Extractive Businesses
- Oil and gas extraction companies
- Other natural resource extraction
- Subject to Emirate-level taxation
- Separate concession agreements
Qualifying Investment Funds
- Proper licensing and regulation
- Widely-held ownership structure
- Investment-focused activities
- No active trading operations
Pension & Social Security Funds
- Public pension schemes
- Private pension funds
- Social security funds
- Subject to qualifying conditions
Free Zone Tax Status Assessment
Determine if you qualify for 0% corporate tax as a Qualifying Free Zone Person.
Individual Income: What's In and What's Out?
A critical distinction in UAE corporate tax is between business income (taxable) and personal income (generally not taxable).
Personal Income NOT Subject to Corporate Tax:
- Employment salaries and wages (public or private sector)
- Interest and income from bank deposits or savings schemes
- Dividends and capital gains from personal shareholdings
- Real estate investment income in personal capacity
- Foreign investor income from dividends, capital gains, interest
- Freelance income earned without commercial license
When Individual Activities Become Taxable
| Scenario | Tax Status | Key Determining Factor |
|---|---|---|
| Holding Commercial License | Taxable | Business structure vs. personal capacity |
| Regular Business Activities | Taxable | Ongoing trade or business in UAE |
| Professional Practice | Taxable | Licensed through business structure |
| Property Trading | Potentially taxable | Frequency and intention of trading |
| Influencers/Content Creators | Depends on structure | Scale, organization, and commercial license |
Free Zone Companies: Special Rules and Requirements
Free zone entities represent one of the most complex areas of UAE corporate tax, with benefits available but only under strict conditions.
Understanding Qualifying Free Zone Person (QFZP) Status
| Requirement | Description | Verification Frequency |
|---|---|---|
| Juridical Person | Must be a company, not individual | At registration |
| Adequate Substance | Sufficient employees, assets, expenditure in Free Zone | Annual assessment |
| Qualifying Activities | Income from specified qualifying activities | Transaction-by-transaction |
| Core Activities | CIGAs conducted in and managed from Free Zone | Continuous monitoring |
Consequences of Inadequate Substance:
Failure to maintain adequate substance results in loss of QFZP status, meaning the entity pays 9% corporate tax on all income (not just non-qualifying income) for the current year and the following four years.
Qualifying vs. Non-Qualifying Income
Qualifying Income (0% tax)
- Transactions with other free zone persons
- Transactions with foreign entities
- Certain IP transactions
- Reinsurance activities
- Fund management services
Non-Qualifying Income (9% tax)
- Transactions with UAE mainland persons
- Immovable property in UAE mainland
- Domestic permanent establishments
- Excluded activities (banking, insurance)
- Certain IP from related parties
Small Business Relief: Revenue-Based Exemption
The UAE provides targeted relief for small businesses through a temporary program designed to ease the compliance burden.
Small Business Relief Key Features:
- Revenue Threshold: AED 3 million or less in current and previous tax periods
- Tax Treatment: Election of SBR treats taxable income as zero
- Effective Tax Rate: 0% corporate tax while relief is elected
- Duration: Available through tax periods ending December 31, 2026
- Application: Voluntary election for each tax period
Strategic Considerations for SBR Election
Example Scenario:
Company: AED 2.5 million revenue, AED 400,000 accumulated losses
Option 1 - Elect SBR for 2026:
- 2026 Taxable Income: AED 250,000
- 2026 Tax with SBR: AED 0
- Accumulated losses: Forfeited
Option 2 - Don't Elect SBR for 2026:
- 2026 Taxable Income: AED 250,000
- Less: Previous losses: (AED 250,000)
- Net Taxable Income: AED 0
- 2026 Tax: AED 0
- Remaining losses to carry forward: AED 150,000
Analysis: Both options result in zero 2026 tax, but Option 2 preserves AED 150,000 losses for future years. If 2027 sees growth to AED 600,000 taxable income, these losses could save up to AED 13,500 in tax.
Registration and Compliance: Required Even at Zero Tax
A common misconception is that businesses paying zero tax don't need to comply with corporate tax regulations. This is incorrect and creates significant compliance risk.
Universal Registration Requirement:
All businesses subject to the corporate tax regime must register, file returns, and comply even if taxable income falls within the zero-rate band.
Who Must Register:
- All UAE mainland companies (regardless of profitability)
- All free zone entities (including QFZPs with 0% rate)
- All foreign entities with UAE permanent establishments
- All partnerships conducting business activities
- Any person conducting business in UAE meeting taxable person criteria
Filing Requirements and Deadlines
| Financial Year End | Filing Deadline | Payment Due |
|---|---|---|
| December 31, 2025 | September 30, 2026 | September 30, 2026 |
| March 31, 2026 | December 31, 2026 | December 31, 2026 |
| June 30, 2026 | March 31, 2027 | March 31, 2027 |
| September 30, 2026 | June 30, 2027 | June 30, 2027 |
Critical Point:
The nine-month filing deadline applies to all taxable persons, including those with zero taxable income, losses, income within the 0% band, QFZP status, or Small Business Relief election.
Practical Scenarios: Am I Subject to Corporate Tax?
Scenario 1: UAE National with Traditional Business
Profile: Emirati citizen owns a trading LLC in Dubai mainland with annual revenue of AED 2 million and profit of AED 300,000.
- Taxable Person: Yes (mainland LLC conducting business)
- Must Register: Yes
- Must File Returns: Yes
- Tax Liability: Zero (profit falls within 0% band up to AED 375,000)
- Can Elect SBR: Yes (revenue below AED 3 million threshold)
Scenario 2: Expatriate Employee with UAE Salary
Profile: Expatriate working for a Dubai company earning AED 30,000 monthly salary plus allowances.
- Taxable Person: No
- Tax on Employment Income: Zero (employment salaries not subject to corporate tax)
- Registration Required: No
- Filing Required: No
Scenario 3: Free Zone Company Exporting Globally
Profile: Technology company in Dubai Internet City selling software to international customers, with AED 5 million revenue, adequate staff and premises in free zone, no UAE mainland sales.
- Taxable Person: Yes
- Eligible for QFZP: Potentially yes (must meet substance and qualifying income tests)
- Tax if QFZP: 0% on qualifying income (exports to foreign customers)
- Must Register and File: Yes
Scenario 4: Individual Property Investor
Profile: Individual owns three apartments in Dubai Marina, earns AED 400,000 annual rental income.
- Taxable Person: No (real estate investment in personal capacity)
- Tax on Rental Income: Zero
- Registration Required: No
- Caution: If forming a property investment company or obtaining commercial license, corporate tax would apply
Common Misconceptions About Corporate Tax Obligations
Misconception 1: "Free zone means no corporate tax"
Reality: All free zone companies are within corporate tax scope. Only Qualifying Free Zone Persons meeting strict conditions can access 0% rate on qualifying income. Non-qualifying free zone entities pay standard 9% on taxable income above AED 375,000.
Misconception 2: "Small revenue means no registration"
Reality: Revenue size doesn't determine registration obligation. All taxable persons must register, even if expecting zero tax liability due to small revenue or losses.
Misconception 3: "Zero tax means zero compliance"
Reality: Even when paying zero tax (due to 0% band, losses, SBR election, or QFZP status), registration and annual filing remain mandatory.
Misconception 4: "Personal income is taxed"
Reality: Employment salaries, personal investment income, personal real estate returns, and individual capital gains remain outside corporate tax scope. Only business income through commercial structures is taxed.
Misconception 5: "UAE nationals are exempt"
Reality: Nationality is irrelevant. UAE nationals conducting business through companies are subject to the same corporate tax rules as foreign-owned businesses.
How One Desk Solution Helps Determine Your Tax Status
Navigating corporate tax obligations requires expertise that combines legal knowledge, tax technical skills, and practical business understanding. At One Desk Solution, we provide comprehensive services to help businesses understand and fulfill their corporate tax obligations.
Our Corporate Tax Assessment Services
| Service | Description | Benefit |
|---|---|---|
| Tax Status Determination | Comprehensive analysis of your business structure and activities | Clear understanding of your obligations |
| Registration Support | Complete FTA registration process management | Proper setup and compliance from start |
| QFZP Compliance | Substance requirement assessment and documentation | Maximize free zone tax benefits |
| Small Business Relief Advisory | SBR eligibility assessment and election strategy | Optimize tax position for growth |
| Compliance Management | Filing deadline tracking and annual return preparation | Avoid penalties and maintain good standing |
Why Choose One Desk Solution?
- Comprehensive Expertise: Deep knowledge of UAE corporate tax law with practical experience
- Dubai Market Focus: Close working relationships with Federal Tax Authority
- Integrated Services: Coordinated solutions across VAT, tax, bookkeeping, and audit
- Proactive Approach: Identify opportunities and flag risks before they become problems
- Clear Communication: Plain language explanations of complex tax concepts
Get Your Corporate Tax Assessment Today
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Frequently Asked Questions
A: Yes, all free zone companies are subject to UAE corporate tax. However, Qualifying Free Zone Persons (QFZPs) that meet specific conditions can benefit from 0% corporate tax on their qualifying income. To qualify as a QFZP, companies must maintain adequate substance in the free zone, derive income from qualifying activities, and meet other regulatory requirements. Non-qualifying free zone entities pay the standard 9% corporate tax on taxable income above AED 375,000.
A: No, rental income earned by individuals from properties they own in their personal capacity is not subject to corporate tax. The UAE corporate tax specifically excludes income earned by individuals from real estate investment in their personal capacity. However, if you operate through a property investment company or hold a commercial license for property trading, then the corporate tax would apply to that business entity.
A: If your taxable income is AED 375,000 or less, you pay 0% corporate tax on that income. However, this does NOT mean you're exempt from compliance. You still must:
- Register with the Federal Tax Authority (FTA)
- File annual corporate tax returns
- Maintain proper accounting records for 7 years
- Comply with all other corporate tax requirements
The AED 375,000 is a tax band, not an exemption from the tax regime itself.
A: It depends on their level of presence in the UAE. Foreign companies that simply have UAE customers but no physical presence or permanent establishment in the UAE are generally not subject to UAE corporate tax. However, if a foreign company has a permanent establishment in the UAE (such as an office, branch, or fixed place of business), or if they have employees working in the UAE for more than 90 days in a 12-month period, they may create a taxable presence and become subject to UAE corporate tax on income attributable to that presence.
A: Yes, if you have established a company or business entity in the UAE, you need to register for corporate tax once you begin conducting business activities. The registration requirement applies from the date you become a taxable person, which is typically when you start your business operations. There's no minimum revenue threshold for registration - even startups with zero revenue in their first year must register if they are conducting business activities. Late registration can result in penalties starting from AED 10,000.
