The Tax Rate in Brief
Taxable income up to AED 375,000 is subject to a 0% rate, while any profit exceeding that threshold is taxed at 9%. The UAE does not levy personal income tax on employment salaries, and the corporate tax rate is assessed on net business profit, not gross turnover.
Small Business Relief Extended Through 2029
Under Ministerial Decision No. 131 of 2026, which amended Article 2 of Decision No. 73 of 2023, the Small Business Relief scheme has been extended for an additional three years, covering tax periods ending on or before 31 December 2029.
Resident taxable persons with gross revenue not exceeding AED 3 million in the current and all prior tax periods can elect for this relief. Upon election, their taxable income for that period is treated as zero, resulting in no corporate tax liability.
Key Conditions and Restrictions
- Relief is not granted automatically; businesses must elect for it when filing their annual tax return on the EmaraTax portal.
- Businesses electing for relief cannot carry forward tax losses or net interest expenditure to subsequent tax periods.
- Entities that are part of Multinational Enterprise (MNE) groups with consolidated revenue exceeding AED 3.15 billion are not eligible for this relief.
- Qualifying Free Zone Persons (QFZPs) are entirely excluded from claiming Small Business Relief.
- Maintaining financial records and supporting business documents for at least 7 years is mandatory.
- Artificially fragmenting a business into multiple legal entities to circumvent the AED 3 million threshold violates general anti-abuse rules.
VAT Is a Separate System
| Threshold | Amount | Implication |
|---|---|---|
| Mandatory VAT Registration | AED 375,000 taxable turnover | Registration is required |
| Voluntary VAT Registration | AED 187,500 | Registration is optional |
| Standard VAT Rate | 5% | Applies to most goods and services |
| Corporate Tax 0% Threshold | First AED 375,000 of profit | A separate tax applied to net profit |
Registration Deadlines
Every business within the scope of corporate tax must register with the Federal Tax Authority on the EmaraTax platform, even if it falls under the 0% bracket or intends to claim Small Business Relief. For entities incorporated from March 2024 onward, tax registration must be completed within three months of license issuance to avoid late registration penalties.
Free Zone Status Is Not Automatically Exempt
A free zone company can benefit from the 0% corporate tax rate only if it meets all Qualifying Free Zone Person criteria, including maintaining adequate substance in the UAE and deriving qualifying income. Qualifying Free Zone Persons are not eligible to elect for Small Business Relief.
Tax Planning Through 2029
- 1Assess current gross revenue and forward projections against the AED 3 million threshold.
- 2If your company is in a growth phase with substantial initial losses, evaluate whether claiming relief is better than carrying forward tax losses to offset future profits.
- 3Complete corporate tax and VAT registrations within the prescribed statutory deadlines.
- 4Configure accounting and record-keeping systems so that supporting documents can be retained and verified for at least 7 years.
Is a licensed freelancer subject to corporate tax?
Yes, licensed business activities fall under corporate tax rules and require registration. Freelancers whose revenue remains within the AED 3 million cap are eligible to elect for Small Business Relief.
Is Small Business Relief applied automatically?
No. The relief is optional and must be actively selected during the annual tax return filing on the EmaraTax portal.
What happens if a company's revenue exceeds AED 3 million?
The business becomes ineligible for the relief and will be taxed under standard corporate tax rules: 0% on the first AED 375,000 of taxable profit and 9% on any amount exceeding that threshold.
This article is general information, not legal or financial advice. Rules change — confirm your own position with a qualified professional before deciding.
