UAE corporate tax and VAT: the essentials for business owners
Watch Alan explain it · 0:55
Read the video transcript
Everyone knows Dubai is tax free. Right? Well, these days, that's not quite the whole story. Since 2023, the UAE has had a corporate tax on business profits. The headline rate? Nine percent. Which sounds bad, until you see how it actually works. Your first three hundred and seventy five thousand dirhams of profit each year? Taxed at zero. That's roughly eighty thousand pounds. Every single year. Smaller businesses can often claim relief that keeps them at zero for now. And there's still no personal income tax. Your salary and your dividends stay yours. So the picture is still very good. It's just not the zero everything story you see on TikTok. The real trap? The admin. Registration has deadlines, and missing them gets expensive. So if you're setting up, and you want the numbers worked through properly, that's exactly what we do. Come and have a chat before you commit to a structure.
The UAE is still highly tax-efficient, but “tax-free” is out of date for businesses. Two taxes matter, plus the obligations that come with them.
Corporate tax
UAE corporate tax is 9% on taxable profits above AED 375,000, profits up to that threshold are effectively at 0%. Crucially, registration and filing are generally required even if no tax is due, so this isn’t something to ignore just because you’re small.
There’s a freezone angle: a “qualifying free zone person” earning “qualifying income” can still benefit from a 0% corporate-tax rate, but the conditions are strict and specific, and not every freezone company qualifies. It’s worth checking rather than assuming.
Small Business Relief
Small Business Relief lets a company with revenue of AED 3 million or less in a tax period elect to be treated as having no taxable income for that period. In August 2026, Ministerial Decision No. 131 of 2026 extended it to tax periods ending on or before 31 December 2029 (it was due to end on 31 December 2026). The AED 3 million threshold has not changed. Qualifying Free Zone Persons and members of large multinational groups are excluded. It is an election, so you still register, file a return and keep records. Check the current wording on the FTA site before relying on it.
VAT
VAT is 5%. Once your taxable turnover passes the mandatory registration threshold, you must register, charge VAT, and file periodic returns. You can register voluntarily below the threshold if it suits your business.
The obligations behind the taxes
Both taxes come with record-keeping and filing duties, and every company also falls under ultimate beneficial owner (UBO) rules. Economic substance reports are no longer required for financial years ending after 31 December 2022, though obligations for earlier years still stand. Staying compliant is mostly about good records and meeting deadlines, not difficult, but not optional.
What it means for you
For most owners the UAE is still very competitive, but the days of “set up and forget” are over. Build registration, filing and bookkeeping into your plan from day one, and the tax side stays simple. If you want the corporate tax and VAT position modelled against your own numbers, our Tax & Compliance team can do that with you.
Further reading: corporate tax filing deadlines, VAT registration, bookkeeping obligations and transfer pricing basics.
Questions people ask
Does my UAE company pay corporate tax?
UAE corporate tax is 9% on taxable profits above AED 375,000; profits up to that threshold are effectively taxed at 0%. Some qualifying freezone income can still qualify for a 0% rate if strict conditions are met. Most companies must register and file regardless of whether tax is due.
Is there VAT in the UAE?
Yes, VAT is 5%. Businesses must register for VAT once their taxable turnover passes the mandatory registration threshold, and may register voluntarily below it. Registered businesses charge VAT and file periodic returns.