Corporate tax basics for a new Dubai business
The UAE introduced federal corporate tax in 2023, and it's worth understanding from day one rather than discovering it at filing time.
The headline rates: 0% on taxable profit up to AED 375,000, and 9% on profit above that threshold. A business with AED 600,000 in annual profit pays 0% on the first AED 375,000 and 9% on the remaining AED 225,000 — not 9% on the whole amount.
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Get my match →Small Business Relief — the key benefit for startups
If your total revenue is AED 3 million or less in a given tax period, you can elect to be treated as having zero taxable income for that period — effectively 0% tax regardless of your profit margin. This isn't automatic; you have to register with the Federal Tax Authority and actively elect it each year.
Small Business Relief is currently available for tax periods ending on or before 31 December 2026, after which it expires. From 2027 onwards, all businesses will fall under the standard rates regardless of revenue size.
Free zone companies aren't automatically tax-free
This catches many founders off guard. To keep a 0% rate on your income as a free zone company, you need to qualify as a "Qualifying Free Zone Person" — broadly, this means maintaining real economic substance in the UAE and earning "qualifying income," which generally means income from outside the UAE mainland or from other free zone entities. Get this wrong and the 9% rate can apply regardless of your free zone status.
Registration is mandatory for everyone
Even if your taxable income falls entirely within the 0% band, every business must register with the Federal Tax Authority and file a return. There's no exemption from registration itself — only from the tax owed. Filing deadline is nine months from the end of your financial year.
Free zone vs mainland — the tax angle
If you're choosing between free zone and mainland partly on tax grounds, the picture is more nuanced than "free zones are tax-free." A mainland company with revenue under AED 3 million can use Small Business Relief and pay zero tax through 2026. A free zone company that doesn't meet the QFZP substance requirements may end up paying 9% regardless. The right structure depends on your specific activities, where your clients are, and your plans for growth.
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