UAE Corporate Tax Rates Explained: 0%, 9% and What Counts as Taxable Income

The UAE corporate tax regime is simple at the headline level—then people get tripped up on one question: what exactly is “taxable income”? The short version is this: the UAE corporate tax rate applies to taxable income (profit), not revenue, and taxable income starts from your accounting net profit/loss with specific adjustments under the Corporate Tax Law and Federal Tax Authority (FTA) guidance.

This article explains the 0% and 9% corporate tax rates, the AED 375,000 threshold, and how taxable income is determined—with clear examples and misconceptions that repeatedly cause compliance issues.

1) UAE corporate tax rates: 0% and 9% (and when 15% appears)

Standard corporate tax rates (most businesses)

• 0% on taxable income up to AED 375,000

• 9% on taxable income above AED 375,000

Free Zone note (important)

Free Zone companies are within scope of corporate tax. A Free Zone Person that qualifies as a Qualifying Free Zone Person (QFZP) can benefit from 0% on “Qualifying Income” and 9% on taxable income that is not qualifying income.

Large multinationals (Pillar Two / DMTT)

From financial years starting on or after 1 January 2025, the UAE introduced a Domestic Minimum Top-Up Tax (DMTT) for in-scope multinational groups (generally €750m+ consolidated revenue), aligned with Pillar Two, targeting a 15% minimum effective tax rate.

2) What counts as “taxable income” in the UAE?

The starting point: Accounting Income (your profit in the financial statements)

Under FTA guidance, the starting point for taxable income is Accounting Income—your accounting net profit/loss for the tax period, based on financial statements prepared under IFRS (or IFRS for SMEs for eligible businesses).

Then you adjust it under the Corporate Tax Law

The Corporate Tax Law sets the framework: taxable income is accounting income adjusted for specific items—such as exempt income, reliefs, deductions, related-party adjustments, tax loss relief, and certain other prescribed adjustments.

Practical meaning: you do not “pick a number.” You build taxable income from profit using the rules.

3) A quick, practical workflow to compute taxable income

Most businesses can think in five steps:

1. Prepare IFRS financial statements (or IFRS for SMEs if eligible).

2. Take Accounting Income (net profit/loss).

3. Apply statutory adjustments to reach Taxable Income (e.g., exempt income, disallowed deductions, reliefs, tax losses, related-party arm’s length adjustments).

4. Apply the rate (0% / 9%, or Free Zone rules if QFZP).

5. File and maintain the required support (documentation matters in practice).

4) Simple examples (0% vs 9% done correctly)

Example A: Mainland (or non-QFZP) business with AED 300,000 taxable income

• Taxable income: AED 300,000

• Rate: 0% up to AED 375,000

• Corporate tax due: AED 0

Example B: Mainland (or non-QFZP) business with AED 800,000 taxable income

• First AED 375,000 at 0% ⇒ AED 0

• Remaining AED 425,000 at 9% ⇒ AED 38,250

• Corporate tax due: AED 38,250

Example C: Qualifying Free Zone Person (QFZP) with mixed income

A QFZP is taxed:

• 0% on Qualifying Income

• 9% on taxable income that is not Qualifying Income

• The “first AED 375,000 at 0%” does not apply to a QFZP.

FTA guidance includes an illustration where a QFZP has Qualifying Income and separate taxable income (non-qualifying), with 9% applied to the non-qualifying taxable income and no AED 375,000 threshold benefit.

5) Small Business Relief: separate from the 0%/9% rate

Small Business Relief is a relief mechanism, not a new rate. Under Ministerial Decision No. 73 of 2023:

• The revenue threshold is AED 3,000,000 per tax period.

• It applies to tax periods starting on or after 1 June 2023 and continues for periods ending on or before 31 December 2026 (subject to conditions).

If you qualify and elect for it, the relief treats you as having no taxable income for the relevant tax period (per the relief framework referenced by the FTA guide).

6) Common misconceptions (and the correct interpretation)

Misconception 1: “Corporate tax is charged on revenue.”

Corporate tax is charged on taxable income, which starts from accounting profit/loss and then gets adjusted under the law.

Misconception 2: “Every Free Zone company pays 0%.”

A Free Zone company must meet conditions to be a Qualifying Free Zone Person, and even then the 0% applies to Qualifying Income, while other taxable income can be taxed at 9%.

Misconception 3: “Everyone gets the AED 375,000 0% band.”

A QFZP specifically is not eligible for the 0% standard rate on the first AED 375,000 of taxable income; the QFZP model is 0% on Qualifying Income and 9% on non-qualifying taxable income.

Misconception 4: “UAE corporate tax means personal salaries are taxed.”

UAE announcements around corporate tax have consistently framed it as a business tax; personal income from employment is treated separately from business income. The official messaging clarifies corporate tax does not apply to personal employment income (while business income of individuals can fall within scope depending on activity).

7) Quick FAQ (SEO-friendly)

Is UAE corporate tax 9% on all profits?
It is 0% up to AED 375,000 of taxable income and 9% above that for standard taxable persons.

How is taxable income calculated?
Start from accounting net profit/loss (Accounting Income) and apply the adjustments in the Corporate Tax Law/FTA guidance to arrive at taxable income.

Do Free Zone companies automatically pay 0%?
0% is available for a Qualifying Free Zone Person on Qualifying Income; non-qualifying taxable income can be taxed at 9%, and the AED 375,000 threshold benefit does not apply to QFZPs.

When does 15% apply in the UAE?
The UAE DMTT applies for financial years starting on or after 1 January 2025 for in-scope multinational groups (typically €750m+ consolidated revenue), aligned to Pillar Two.

UAE corporate tax is straightforward at the headline level—0% up to AED 375,000 of taxable income and 9% above that—but the outcome depends on how you build taxable income from accounting profit and how you are classified (standard taxable person vs Qualifying Free Zone Person, and whether Pillar Two/DMTT is relevant).

If you want your corporate tax position done properly—clean taxable income build, Free Zone qualification review, and a defensible filing pack—engage Paulson & Partners to structure, document, and execute your UAE corporate tax compliance end-to-end.