Understanding UAE Corporate Tax: Rates, Thresholds & Free Zone Rules

By Kitaab on June 18, 2025

Corporate tax in the UAE is calculated by starting with your accounting profit based on IFRS (International Financial Reporting Standards). From there, you add back any non-deductible expenses and subtract exempt income. The applicable tax rate, 0%, 9%, or 15%, is then applied to the resulting taxable income.

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Taxable Income	Corporate Tax Rate
Up to AED 375,000	0%
Above AED 375,000	9%
Large MNEs (from Jan 2025)	15% (Under Global Minimum Tax / DMTT)

0% tax supports small businesses and startups by allowing them to grow without immediate tax burdens.
9% tax applies only to profits exceeding AED 375,000; meaning businesses are taxed only on the amount above that threshold.
Large multinational enterprises with global revenue exceeding €750 million pay 15% corporate tax on their UAE income starting January 2025.

What About Free Zone Companies?

Free zone businesses can still enjoy 0% corporate tax on qualifying income, but the conditions are stricter:

They must maintain adequate substance (real presence and activity in the UAE)
Income must be qualifying, typically exports, services to overseas clients, or trading within the same free zone
A Free Zone Person can still qualify for the 0% tax rate even if they earn some non-qualifying income as long as this non-qualifying revenue does not exceed 5% of total revenue or AED 5 million, whichever is lower.

A small startup with AED 200,000 net profit pays 0% corporate tax since its income is below the AED 375,000 threshold.

An SME with AED 500,000 net profit is taxed at 0% on the first AED 375,000, and the remaining AED 125,000 is taxed at 9%, resulting in AED 11,250 tax due.

Disclaimer: Content posted is for informational & knowledge sharing purposes only and is not intended to be a substitute for professional advice related to tax, finance, legal, compliance, or accounting. No warranty whatsoever is made in this regard, and it is not intended to provide and should not be relied on for tax/ finance/ legal/ compliance or accounting advice. The content posted is subject to future amendments / changes / clarifications in the regulation by the authorities.

For any clarifications, you may contact our finance, tax, compliance, legal team.