Since mid-2023, every business structuring decision in Dubai has had to account for the UAE’s federal corporate tax. A mainland company pays the tax only on profit above a threshold. A free zone company that meets strict conditions pays nothing on its qualifying income.
How UAE corporate tax applies
The first financial years taxed under Federal Decree-Law No. 47 of 2022 began on or after June 1, 2023. Location within Dubai doesn’t take a company outside it, because a free zone company is a taxable person like any other. Each return is due within nine months after the end of the tax period.
What a company pays depends on how much profit it makes and what kind of income the profit comes from. A qualifying free zone person, a free zone company that satisfies the law’s conditions, pays one rate on qualifying income and another on the rest.
| Taxable person and income | Corporate tax rate |
| Profit up to AED 375,000, any taxable person | 0% |
| Profit above AED 375,000 | 9% |
| Qualifying income, qualifying free zone person | 0% |
| Other income, qualifying free zone person | 9% |
| UAE-source income of a non-resident with no permanent establishment (fixed place of business) here | Withholding tax at 0% |
Free zone and mainland companies
Which authority licenses a company depends on where it sets up. Mainland companies go to Dubai’s Department of Economy and Tourism (DET). In a free zone, the zone’s own regulator issues the license, under rules the zone writes itself. Executive Council Resolution No. 11 of 2025 now also lets a Dubai free zone company ask the DET for approval to operate on the mainland.
The zones vary in size and in the law they apply. DMCC, the Dubai Multi Commodities Centre, gives a sense of scale. This Government of Dubai authority reports more than 26,000 registered companies. The Dubai International Financial Centre (DIFC) has its own court system. A dispute there goes before the DIFC Courts. Judges there apply English-language common law alongside the UAE’s civil law system.
Conditions for a qualifying free zone person
A free zone company earns that status only by meeting every condition in Article 18 of the law. It needs adequate substance in the UAE. Its dealings with related companies have to follow market terms, as the transfer pricing articles require. Audited financial statements are required as well. A company that elects to pay tax at the standard rates forfeits the status.
Income from outside the qualifying activities has a ceiling too. Non-qualifying revenue may reach 5% of total revenue or AED 5 million, whichever is lower, before the status is lost. Ministerial Decision No. 229 of 2025 fixed that small-amount rule. It applies from June 1, 2023.
Small Business Relief
Small businesses can pay no corporate tax at all, for a time. A resident business may elect Small Business Relief if its revenue has never gone above AED 3 million in any tax period so far. The relief treats it as having no taxable income for that period. A business renews the election in every later period.
In August 2026, Ministerial Decision No. 131 of 2026 extended the relief to tax periods that end on or before December 31, 2029. Qualifying free zone persons can’t use it. Nor can a member of a multinational group with consolidated revenue above AED 3.15 billion.
Large groups and the top-up tax
The very largest groups pay a higher rate than everyone else. A group with global revenue of €750 million or more in two of the four preceding years owes a domestic minimum top-up tax. The top-up brings its effective rate there to 15%.
The tax has its legal basis in Federal Decree-Law No. 60 of 2023. The cabinet put it in place through Decision No. 142 of 2024, for financial years that begin on or after January 1, 2025. The UAE decided against the income inclusion rule of the global minimum tax. If it had adopted that rule, a UAE parent would pay top-up tax on its low-taxed subsidiaries abroad.
Transfer pricing and interest deductions
A company keeps a master file and a local file, the group’s transfer pricing records, once group revenue reaches AED 3.15 billion. Ministerial Decision No. 97 of 2023 sets that threshold. A company with AED 200 million of revenue of its own keeps the files too, whatever its group earns.
Net interest expense is deductible up to 30% of EBITDA, a company’s earnings before interest, tax, depreciation and amortization. The cap doesn’t apply when net interest is AED 12 million or less. A group that borrows from an affiliate abroad can compare this limit with those in other countries in the financing guide.
Registration and e-invoicing
Three months is the deadline. Any company formed in the UAE since March 1, 2024 has that long after incorporation to register for corporate tax. The penalty for missing it is AED 10,000. The Federal Tax Authority (FTA) still waives it, though, for any company whose first return arrives within seven months after its first tax period ends.
E-invoicing begins with selected taxpayers. Ministerial Decision No. 244 of 2025 set July 1, 2026, as the date for their pilot. Sales to consumers stay outside the system for now. Every other business joins on a date tied to its revenue.
| Business | E-invoicing timeline |
| Revenue of AED 50 million or more | Accredited service provider appointed by October 30, 2026, e-invoicing mandatory from January 1, 2027 |
| Revenue below AED 50 million | Provider appointed by March 31, 2027, mandatory from July 1, 2027 |
| Government entities | Provider appointed by March 31, 2027, mandatory from October 1, 2027 |
Other taxes and ownership rules
VAT, at 5%, hasn’t changed since January 1, 2018. The amendments in force from January 2026 changed procedures only. A business that applies the reverse charge, meaning it accounts for the VAT on a purchase itself, no longer has to issue a self-invoice.
Every company must also identify anyone who owns or controls 25% or more of its capital or votes, under Cabinet Resolution No. 109 of 2023. It has 15 days to tell the registrar about any change in those details.
FAQ
Do owners of a Dubai company pay personal income tax?
No. The UAE doesn’t levy income tax on individuals. A salary or personal investment income doesn’t count as business activity for corporate tax either. An individual pays corporate tax only for a calendar year in which business turnover exceeds AED 1 million.
Is economic substance reporting still required?
Not for recent years. Under Cabinet Decision No. 98 of 2024, no report is due for any financial year that ends after December 31, 2022. Earlier years still count, though. A company that missed an obligation in those years remains liable for it, including any penalty the FTA has already imposed.
How can a UAE company prove its tax residence to a treaty partner?
It applies to the FTA for a tax residency certificate. A certificate is valid for one tax period or for another 12-month period that the applicant selects. The UAE has concluded 137 double tax treaties.
IBSA Middle East branch
The International Business Structuring Association (IBSA) launched its Middle East branch in Dubai with a discussion group at The Capital Club. Guests examined UAE tax treaties and structuring opportunities across the region. Sessions on beneficial ownership disclosure and on changing conditions for investment followed.
Giovanni Rossi of Bonnard Lawson chaired the branch. His committee drew on specialists in international tax, banking, law, corporate compliance, real estate, accounting and company structuring. IBSA’s Knowledge Bank later published notes on the launch topics.
Branch committee
- Alexander Bello
- Pierre-Yves Lucas
- Shaukat Murad
- Barbara Neuerburg
- Hooriya Qazal
- Giovanni Rossi, chair
- Roy Saunders
- Dmitry Zapol
Upcoming branch events
There are currently no upcoming chapter events. Check back soon.
Past branch events
The April 2017 session on residence planning took up a theme the European branch had discussed in Geneva a month earlier.
| Date | City | Event | Venue |
| June 13, 2017 | Dubai | Planning ahead of India’s fiscal and regulatory reforms | Dubai Boardroom, The Capital Club |
| April 11, 2017 | Dubai | Residence planning for entrepreneurial clients | The Capital Club |
| October 18, 2016 | Dubai | Launch of the Middle East branch | The Capital Club |