TRW & Co · Tax & Regulatory
Corporate Tax in the UAE
Corporate tax in the UAE charges 9% on business profits above AED 375,000, with a 0% route for qualifying free zone income and a 15% top-up for the largest groups. In 2026 the rules are shifting again: small business relief has been extended to 2029, an R&D credit has arrived and refund windows are closing. This guide sets out what decision-makers need to know.
Key pointSmall business relief can now be elected for tax periods ending on or before 31 December 2029, but electing it excludes the business from the new R&D tax credit. Model both before filing each return.
At a glance
Two-band headline rate
Taxable income up to AED 375,000 is taxed at 0% and income above it at 9%, for financial years starting on or after 1 June 2023.
Free zone 0% is conditional
Qualifying free zone persons pay 0% only on qualifying income and must meet substance, de minimis, audit and transfer pricing conditions every year.
New R&D tax credit
From tax periods beginning 1 January 2026, a tiered non-refundable credit of 15% to 50% applies to approved R&D spend up to AED 5 million.
Top-up tax for large groups
Multinational groups with revenue of EUR 750 million or more face a 15% domestic minimum top-up tax from financial years starting 1 January 2025.
Refund window closing
The amended Tax Procedures Law limits refunds to five years, with a transitional window for older credit balances ending on 31 December 2026.
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What corporate tax in the UAE covers
Corporate tax in the UAE is a federal tax on business profits, levied under Federal Decree-Law No. 47 of 2022 on the Taxation of Corporations and Businesses (the Corporate Tax Law) for financial years starting on or after 1 June 2023. It applies to mainland companies, free zone entities, foreign companies with a UAE permanent establishment and individuals running a business above the relevant turnover threshold.
The headline rates are simple: 0% on taxable income up to AED 375,000 and 9% above that. The detail is not. Free zone status, group structures, related-party pricing, losses, the domestic minimum top-up tax for large groups and a growing list of incentives all change the number a business actually pays.
For most businesses the regime is now in its third or fourth filing cycle. That shifts the legal questions away from registration and towards audit readiness, refunds, restructuring and the incentives introduced in 2025 and 2026. Decisions taken now about structure and documentation will be tested by the Federal Tax Authority (FTA) years later.
The legal framework and who administers it
The Corporate Tax Law sets the charge, the rates, the exemptions, the reliefs and the main anti-avoidance rules. It is supported by Cabinet Decisions, Ministerial Decisions and FTA Decisions, published on the FTA’s legislation page, that fill in thresholds and conditions, and by FTA guides and public clarifications that set out the authority's interpretation. Policy sits with the Ministry of Finance; administration, registration, returns and audits sit with the Federal Tax Authority through the EmaraTax platform.
Procedure is governed by the Tax Procedures Law, Federal Decree-Law No. 28 of 2022, available with other federal texts on the UAE Legislation portal. It was amended by Federal Decree-Law No. 17 of 2025 with effect from 1 January 2026, introducing a five-year window for refund requests and extending the FTA's audit window where a refund claim is made late in the limitation period. The penalty framework for VAT and excise was overhauled by Cabinet Decision No. 129 of 2025 from 14 April 2026, a sign of how actively the system is being recalibrated.
Amendments that matter in 2026
The Corporate Tax Law itself has been amended twice. Federal Decree-Law No. 60 of 2023 paved the way for a domestic minimum top-up tax at 15% for large multinational groups, which applies to financial years starting on or after 1 January 2025 under Cabinet Decision No. 142 of 2024. Federal Decree-Law No. 28 of 2025, effective from its publication in late December 2025, rewrote the order in which credits are set against corporate tax payable and added a new Article 49 bis allowing refunds of excess credits arising from incentives specified by Cabinet Decision.
That change made room for the first targeted incentive. Cabinet Decision No. 215 of 2025 and Ministerial Decision No. 24 of 2026 introduce a research and development tax credit for tax periods beginning on or after 1 January 2026, discussed below.
| Item | Position | Practical note |
|---|---|---|
| Standard rate | 0% up to AED 375,000; 9% above | Applies per taxable person, or per tax group |
| Qualifying free zone person | 0% on qualifying income; 9% on other income | Substance, audited accounts and de minimis conditions must all be met |
| Domestic minimum top-up tax | 15% effective rate | Groups with consolidated revenue of EUR 750 million or more, from 1 January 2025 |
| Withholding tax | Currently none imposed in practice | The law allows for it, but no rate is applied today |
| Return and payment | Generally within 9 months of the end of the tax period | Filed and paid on EmaraTax |
| Small business relief | Election available for tax periods ending on or before 31 December 2029 (extended by Ministerial Decision No. 131, announced in August 2026) | Revenue threshold and exclusions apply; check eligibility each year |
Free zones, groups and structure: the decisions that move the number
The single most valuable planning question for corporate tax in the UAE is usually whether a free zone entity is a qualifying free zone person. Qualifying status gives a 0% rate on qualifying income, but only where the entity maintains adequate substance in the free zone, derives qualifying income from qualifying activities, does not elect to be taxed at the standard rate, meets the de minimis test on non-qualifying revenue, complies with transfer pricing rules and prepares audited financial statements. Failing any condition can cost the entity its status for the current period and a number of following periods.
The most common trap is mainland revenue. Income from transactions with mainland customers is generally non-qualifying unless it falls within narrow exceptions, so a free zone trading company that has quietly grown its onshore sales can tip over the de minimis limit without noticing. Model the revenue mix before year end, not after.
Tax groups and intra-group reliefs
Resident companies with a high degree of common ownership can form a tax group and file a single return, which removes intra-group transactions from the computation. Separately, qualifying group relief and business restructuring relief allow assets and businesses to move within a 75% ownership group, or on a qualifying reorganisation, without an immediate tax charge, subject to clawback if the relationship ends within the holding period. These reliefs are elective and conditional, so document the election and keep evidence of the conditions.
Exempt income and the participation exemption
Dividends from UAE resident companies are exempt. Dividends and capital gains from foreign shareholdings can be exempt under the participation exemption where minimum ownership, holding period and subject-to-tax conditions are met. Qualifying public benefit entities, government entities, extractive businesses within emirate regimes and certain investment funds can be exempt persons, often only on application. A family office or private wealth structure may also seek transparent treatment for a family foundation under Article 17.
Free zone status is not a label you register once. It is a test the business must pass every year, on facts the FTA can audit for years afterwards.
Deductions and anti-avoidance limits
Expenses are deductible if incurred wholly and exclusively for the business, but some are restricted: entertainment costs are only partly deductible, net interest above a de minimis amount is capped by reference to adjusted EBITDA, and fines, bribes and most dividends paid are not deductible. Payments to connected persons, such as owner-directors and their relatives, are deductible only at market value. The general anti-abuse rule lets the FTA disregard arrangements whose main purpose is a tax advantage without valid commercial reasons.
Incentives, the R&D credit and Pillar Two
The UAE has started to use the corporate tax system to reward activity rather than only to raise revenue. The research and development credit is the first concrete example. It is tiered: 15% on the first AED 1 million of qualifying expenditure with at least two R&D staff, 35% between AED 1 million and AED 2 million with at least six, and 50% between AED 2 million and AED 5 million with at least fourteen, subject to an annual expenditure cap of AED 5 million.
The credit is non-refundable, can be set against corporate tax or top-up tax and can be carried forward. Projects need pre-approval from the Emirates Research and Development Council, each project must reach at least AED 500,000 of qualifying expenditure in the period, and the claim is made with the return for the period in which the spend was incurred. Free zone persons are within scope, but entities that elect small business relief are excluded.
The domestic minimum top-up tax
Large multinational groups within the OECD Pillar Two scope, broadly those with consolidated revenue of EUR 750 million or more, face a 15% domestic minimum top-up tax on UAE profits for financial years starting on or after 1 January 2025. For these groups, corporate tax in the UAE is no longer a 9% question: free zone income taxed at 0% will usually be topped up, and the way incentives are characterised affects the effective tax rate calculation. Groups must register, collect data at constituent entity level and plan the first top-up return and GloBE information return well in advance.
Qualifying free zone review
We test each free zone entity against the substance, qualifying income, de minimis and audit conditions, and map mainland revenue so status is not lost by accident.
Group and restructuring reliefs
We advise on tax groups, qualifying group relief and business restructuring relief before transfers happen, and on the clawback risk if ownership later changes.
R&D credit and incentives
We work with technical and tax advisers to frame projects for Council pre-approval, align contracts and IP ownership, and support the claim with the return.
Pillar Two readiness
We help in-scope groups understand the top-up tax rules, register on time and structure intra-group arrangements consistently with the effective tax rate calculation.
Audit and dispute support
We prepare for FTA audits, draft reconsideration requests and objections, and coordinate with registered tax agents who file on the client’s behalf.
Deal and contract tax clauses
We draft tax warranties, indemnities, gross-up and price-adjustment clauses so that corporate tax exposure is allocated clearly in transactions.
Compliance timeline: from registration to audit
Every taxable person must register, including free zone entities that expect to pay nothing and individuals whose business turnover exceeds the relevant threshold. Registration deadlines are set by FTA decision and depend on the date of incorporation or licence issue, and late registration carries a fixed penalty. From there the cycle repeats annually.
- Register and obtain a tax registration number. Register on EmaraTax by the deadline that applies to the entity. Check that free zone entities, dormant companies and branches are registered, and that the tax period matches the financial year.
- Confirm elections early. Decide on tax group formation, small business relief, qualifying group relief, realisation basis for gains and transitional elections before the return is due, because many are made in or with the return.
- Close the books on accrual accounts. Prepare financial statements under IFRS (or IFRS for SMEs where permitted). Audited statements are required for qualifying free zone persons and for businesses above the revenue threshold set by ministerial decision.
- Run the computation. Adjust accounting profit for exempt income, non-deductible items, interest limitation, connected-person payments at market value, transfer pricing adjustments and loss relief.
- Prepare transfer pricing disclosures. Complete the related-party and connected-person disclosures filed with the return and keep master and local files where the thresholds are met. See our page on transfer pricing in the UAE.
- File and pay. File the return and pay the tax due, generally within nine months of the end of the tax period. Keep evidence of payment and of any credits claimed.
- Keep records and watch the limitation window. Retain records for the statutory period, track FTA correspondence daily and diarise refund and amendment windows under the amended Tax Procedures Law.
Ministerial Decision No. 131, announced in August 2026, extended small business relief to tax periods ending on or before 31 December 2029, for businesses with revenue of AED 3 million or less. If you rely on it, remember that electing relief shuts you out of the R&D credit for that period. Running both scenarios before each return is the cheapest decision you will make this year.
Documents and evidence to assemble
An FTA audit of corporate tax in the UAE is document-driven. The authority will expect the taxpayer to explain the computation line by line and to produce the contracts, invoices and board papers behind it, usually on short notice and, where requested, in Arabic. Assemble the following before the first enquiry arrives:
- Trade licence, constitutional documents, shareholder register and group structure chart, with ownership percentages for each entity.
- Financial statements (audited where required), trial balance, fixed asset register and reconciliations from accounting profit to taxable income.
- Evidence of free zone substance: leases, headcount, payroll, board minutes held in the free zone and the activity log behind qualifying income.
- Intercompany agreements, transfer pricing documentation, benchmarking studies and the connected-person schedule.
- Loan agreements and interest computations supporting the interest limitation calculation.
- Election records, FTA approvals for exempt status or family foundation transparency, and R&D Council pre-approvals.
- Correspondence with the FTA, including clarifications, reconsideration requests and any voluntary disclosures.
Treat this file as a living document. Restructurings, acquisitions and new free zone licences each add evidence that should be captured when it is created, not reconstructed under audit pressure.
Risks and common mistakes
Assuming free zone means tax free
A free zone licence does not by itself give a 0% rate. Qualifying status depends on substance, qualifying income, the de minimis test, audited accounts and transfer pricing compliance. We regularly see entities that grew mainland sales, hired staff outside the zone or outsourced core activities without checking the effect. Losing status can affect the current year and several following tax periods, so the cost of a mistake is multiplied. Review the conditions annually and before any change to the business model, customer base or staffing.
Ignoring connected-person payments
Salaries, rent, management fees and consultancy paid to owners, directors and their relatives are deductible only at market value, and payments above AED 500,000 must be disclosed with the return. Owner-managed businesses are the most exposed because these arrangements are informal and undocumented. Put written agreements in place, benchmark the amounts and record board approval. If historic payments were above market value, consider whether a correction or voluntary disclosure is needed before the FTA raises it.
Missing elections and deadlines
Many reliefs depend on an election made in time, and several deadlines run in business days. Registration, return, payment, reconsideration and objection deadlines are separate, and the FTA’s EmaraTax inbox is the official channel. A missed election cannot always be cured later. Assign a named person to monitor EmaraTax, maintain a calendar of statutory windows and confirm elections in writing with the tax agent before the filing season.
Restructuring without tax analysis
Moving assets between group companies, merging entities or converting a branch can trigger a gain at market value unless a relief applies and its conditions are met. Clawback can follow if ownership changes within the holding period. Company law steps, such as those in our guide to corporate restructuring, should be sequenced with the tax analysis so that relief is preserved and documented.
Overlooking the 2026 refund window
The amended Tax Procedures Law limits refund requests to five years and set transitional rules for older credit balances, with a claim window ending on 31 December 2026 for balances already older than five years. Corporate tax overpayments, withholding of incentives and credit balances should be reconciled now. Unclaimed amounts may be lost permanently once the window closes.
Cross-border angle: groups, treaties and home-country rules
Many UAE businesses sit inside groups headquartered in Bangladesh, India, the United Kingdom, Singapore, China or Saudi Arabia, or are owned by founders resident in those countries. Corporate tax in the UAE interacts with their rules in three main ways: residence and permanent establishment, the treatment of dividends and service fees flowing out of the UAE, and controlled foreign company or management-and-control rules at home.
A UAE company managed in practice from Dhaka, London or Mumbai can face residence claims abroad regardless of where it is incorporated. Equally, a foreign company whose staff conclude contracts in the UAE may create a UAE permanent establishment. The UAE has an extensive network of double tax agreements, summarised on the UAE Government portal, and tax residency certificates issued by the FTA support treaty claims, but each treaty must be read on its own terms.
Outbound payments are not currently subject to UAE withholding tax, which makes the UAE efficient as a regional holding or service hub. The receiving country may still tax the income, and transfer pricing rules on both sides must be consistent. Where Saudi Arabia is involved, zakat and Saudi withholding tax rules add a further layer. We coordinate with local counsel and tax advisers in each country through TRW & Co’s network so that both ends of a transaction are analysed together.
Structure choices also connect with corporate law. Our pages on free-zone company formation, mainland company structures and foreign direct investment explain the licensing side of the same decisions.
How TRW & Co helps with corporate tax in the UAE
TRW & Co gives legal advice on corporate tax in the UAE: interpreting the law, structuring groups and transactions, drafting the agreements that support a tax position and handling disputes. We are not a registered tax agent. Filing on EmaraTax and representation as a tax agent before the FTA are carried out by registered tax agents and accountants, with whom we work closely so that the legal analysis and the filing tell the same story.
Typical mandates include free zone qualification reviews, pre-transaction structuring for acquisitions and mergers and acquisitions, connected-person and intercompany documentation, R&D credit readiness, Pillar Two impact analysis and FTA audits and objections. When a dispute escalates, our page on tax disputes and FTA audits sets out the reconsideration, committee and court route. Where representation before the UAE courts is required, we work alongside locally licensed advocates.
To discuss a structure, an audit or a deadline, contact our Dubai team or browse our practices for related areas.
Checklist for decision-makers
- Is every UAE entity, including dormant and free zone entities, registered for corporate tax with the correct tax period?
- Have we tested each free zone entity against every qualifying free zone person condition for this financial year?
- Do we know whether small business relief or the R&D credit is worth more to us each year, and have we modelled the position once relief ends after 2029?
- Are connected-person payments documented, benchmarked and below or properly disclosed against the AED 500,000 reporting line?
- Have restructurings since 2023 been checked for relief conditions and clawback periods?
- Is the group within the Pillar Two scope, and is the top-up tax registration and data collection plan in place?
- Have credit balances and overpayments been reconciled before the 31 December 2026 transitional refund window closes?
- Who monitors EmaraTax daily, and who signs off elections and returns with the registered tax agent?
If any answer is uncertain, an early review of corporate tax in the UAE is cheaper than correcting the position under audit. For the indirect tax side of the same transactions, see our page on VAT in the UAE.
Frequently asked questions
01What is the corporate tax rate in the UAE?
The standard rate is 0% on taxable income up to AED 375,000 and 9% on taxable income above that. Qualifying free zone persons can pay 0% on qualifying income and 9% on the rest. Large multinational groups with consolidated revenue of EUR 750 million or more are also subject to a 15% domestic minimum top-up tax for financial years starting on or after 1 January 2025. There is currently no withholding tax applied on outbound payments in practice.
02Do free zone companies have to register and file?
Yes. Every free zone entity is a taxable person and must register with the Federal Tax Authority and file a corporate tax return, even if it expects to pay nothing. To pay 0% it must meet all the qualifying free zone person conditions, including adequate substance, qualifying income, the de minimis test on non-qualifying revenue, transfer pricing compliance and audited financial statements. Failing a condition can remove the benefit for the current and several following tax periods.
03When are corporate tax returns due?
The return and payment are generally due within nine months of the end of the tax period. For a company with a calendar financial year, that means by 30 September of the following year. Registration has its own deadlines set by FTA decision, and several elections must be made in or before the return. Because reconsideration and objection windows run in business days, it is important to monitor EmaraTax correspondence closely after filing.
04Should we elect small business relief or claim the R&D credit?
It depends on revenue, R&D spend and the year. Small business relief, extended in August 2026, is available for tax periods ending on or before 31 December 2029 and treats eligible businesses as having no taxable income. The R&D credit applies to tax periods beginning on or after 1 January 2026, but entities that elect small business relief are excluded. A business with significant research spending should model both outcomes each year with its tax adviser before filing.
05How does the R&D tax credit work?
Under Cabinet Decision No. 215 of 2025 and Ministerial Decision No. 24 of 2026, eligible taxpayers can claim a non-refundable credit of 15%, 35% or 50% on bands of qualifying R&D expenditure up to an annual cap of AED 5 million, depending on R&D headcount. Projects need pre-approval from the Emirates Research and Development Council and at least AED 500,000 of qualifying spend. Unused credits can be carried forward. The claim is made with the return.
06Can we challenge an FTA corporate tax assessment?
Yes. The route is a reconsideration request to the FTA, then an objection to the Tax Disputes Resolution Committee, then an appeal to the competent federal court, with each step subject to short deadlines counted in business days. Payment of the disputed tax is generally required before the committee will hear an objection. We advise on the merits, prepare submissions and coordinate with registered tax agents and, for court stages, locally licensed advocates.
07Is TRW & Co a registered tax agent?
No. TRW & Co provides legal advice on corporate tax in the UAE, including structuring, documentation, transactions and disputes. Return filing and tax agent representation before the FTA are handled by registered tax agents and accountants, and we work alongside them so the legal analysis and the filing are consistent. You can reach our team at info@trw.co or +971 58 942 1012.
Sources and official materials
- Federal Tax Authority: Corporate Tax — Guides, public clarifications and decisions on corporate tax
- Federal Tax Authority: Legislation — Corporate Tax Law, Tax Procedures Law and implementing decisions
- Ministry of Finance — Tax policy, Cabinet and Ministerial Decisions, R&D incentive announcements
- UAE Government portal: Corporate tax — Official overview of the corporate tax regime
- UAE Government portal: Taxation — Overview of federal taxes and tax residency
- UAE Legislation portal — Official texts of federal decree-laws
General information only, current as at 27 October 2026. It is not legal advice and does not create a lawyer–client relationship. UAE law differs between the onshore jurisdiction, the DIFC, ADGM and the free zones, and changes frequently; check current official sources and take advice on the facts of your matter.
