Corporate tax arrived in the UAE — and for a country famous for 0% tax, that caused understandable anxiety. The good news: for most small businesses and free zone companies, the headline 9% may not apply at all. This guide explains, in plain English, exactly who pays what in 2026, so you can plan instead of worry.
The basic rule: 0% and 9%
UAE corporate tax works on two bands:
- 0% on taxable income up to AED 375,000
- 9% on taxable income above AED 375,000
That AED 375,000 threshold is designed to protect small businesses and startups. If your annual taxable profit stays under it, your corporate tax rate is effectively zero — though you may still need to register and file (more on that below).
The free zone twist: the 0% that everyone talks about
Free zone companies can access a 0% rate on their “qualifying income” — but only if they meet the conditions to become a Qualifying Free Zone Person (QFZP). Income that doesn’t qualify is taxed at 9%.
This is the single most misunderstood part of the system. Being in a free zone does not automatically mean 0% — you have to *qualify and stay qualified*. We break down exactly how in free zone qualifying income.
Who pays what — at a glance
| Situation | Corporate tax |
|---|---|
| Any business, profit under AED 375,000 | 0% |
| Mainland business, profit over AED 375,000 | 9% on the excess |
| Free zone QFZP — qualifying income | 0% |
| Free zone QFZP — non-qualifying income | 9% |
| Small business electing relief (revenue ≤ AED 3M) | Treated as no taxable income |
Small businesses may pay nothing at all
If your revenue is AED 3 million or less, you may elect Small Business Relief and be treated as having no taxable income — through 31 December 2026. It’s one of the most valuable provisions for young companies; see whether you qualify in small business relief.
Important: 0% does not mean “do nothing”
Even if your rate is 0%, you almost certainly still have to register for corporate tax and file a return — including free zone companies and QFZPs. Missing the registration deadline triggers an automatic AED 10,000 penalty. Don’t let a 0% rate lull you into inaction — check the registration deadlines.
Corporate tax is not VAT
A quick clarification, because they’re often confused: corporate tax is a tax on profit; VAT is a 5% tax on sales. They’re separate registrations with separate rules — see VAT registration.
Frequently asked questions
What is the corporate tax rate in the UAE?
0% on taxable income up to AED 375,000 and 9% on taxable income above that threshold.
Do free zone companies pay corporate tax?
A Qualifying Free Zone Person pays 0% on qualifying income and 9% on non-qualifying income. All free zone companies must still register, even at 0%.
Is there a way to pay no corporate tax?
Businesses with revenue up to AED 3 million can elect Small Business Relief through 31 December 2026 and be treated as having no taxable income.
Not sure which rate applies to you?
Corporate tax depends on your structure, income type, and free zone status — and getting it wrong is expensive. Chat with us on WhatsApp and we’ll tell you exactly where you stand.
