Rates, who must register, the 9-month filing rule, Small Business Relief, free zone qualifying income, penalties and a practical compliance checklist — updated for the 30 September 2026 deadline.
By Mohamed Ashfaq, Chartered Accountant · Updated 2026-09-08 · 14 min read
Corporate Tax took effect in the UAE for financial years starting on or after 1 June 2023. Three years on, the regime is fully operational: most businesses have registered, first returns have been filed, and the Federal Tax Authority (FTA) has started issuing penalties and audit notices. The system is deliberately simple — a 9% headline rate — but the details (free zone conditions, Small Business Relief, related-party rules and the compliance calendar) decide whether you pay the right amount and avoid fines.
Tax is charged on taxable income — accounting profit under IFRS adjusted for exempt income, non-deductible expenses, interest limitation, losses and reliefs — not on revenue.
Registration is mandatory for mainland companies and branches, free zone companies, foreign companies with a UAE permanent establishment, partnerships, and individuals whose UAE business turnover exceeds AED 1 million in a calendar year. Exempt entities (government bodies, qualifying investment funds, public benefit entities, extractive businesses taxed at Emirate level) often still need to register to claim their exemption. Salaried employees and individuals with only personal investment or real estate income are outside the tax.
Registration is done on the FTA's EmaraTax portal. New companies must register within three months of incorporation. You will need the trade licence, Emirates ID and passport of the authorised signatory, the Memorandum of Association, ownership details and the financial year-end. Approval produces a Corporate Tax Registration Number (TRN) that must be quoted on returns.
Late registration attracts an AED 10,000 penalty. The FTA has offered a waiver where the first return is filed within seven months of the end of the first tax period — if you were late, file promptly and apply.
A Qualifying Free Zone Person pays 0% on Qualifying Income if it maintains adequate substance in the free zone, derives qualifying income, has not elected to be taxed at 9%, complies with transfer pricing rules, prepares audited financial statements, and keeps non-qualifying revenue within the de minimis limit (the lower of 5% of total revenue or AED 5 million).
Qualifying activities include manufacturing, processing, trading of qualifying commodities, holding shares, fund and wealth management, headquarters and treasury services to related parties, logistics, and distribution from a designated zone. Transactions with other free zone persons generally qualify; income from mainland UAE customers generally does not, unless it is a qualifying activity. Breaching the de minimis threshold disqualifies the entity for that year and the following four.
Resident businesses with revenue of AED 3 million or less in the current and every previous tax period may elect Small Business Relief and be treated as having no taxable income. The relief is available for tax periods ending on or before 31 December 2026, is not available to QFZPs or members of large multinational groups, and must be elected on the return. Losses and interest are not carried forward for periods in which relief is claimed, so electing is not always the best choice for a growing business.
| Failure | Penalty |
|---|---|
| Late registration | AED 10,000 |
| Late return | AED 500 per month (or part) for the first 12 months, AED 1,000 per month thereafter |
| Late payment | 14% per annum on the unpaid amount, calculated monthly |
| Incorrect return not corrected by voluntary disclosure | AED 500 |
| Failure to keep records | AED 10,000; AED 20,000 for a repeat within 24 months |
| Failure to notify a change in registration details | AED 1,000; AED 5,000 for a repeat |
Records must be retained for seven years after the end of the tax period.
For financial years starting on or after 1 June 2023. Calendar-year companies had their first tax period from 1 January to 31 December 2024 and their second for 2025, due by 30 September 2026.
Yes, once business turnover exceeds AED 1 million in a calendar year. Employment income, personal investment income and personal real estate income are not taxed.
Corporate Tax is 9% on profits above AED 375,000, filed annually. VAT is 5% charged on sales and remitted net of input tax, usually quarterly. They have separate registrations, thresholds and returns.
Dividends and capital gains from qualifying shareholdings (5% or more, held 12 months, in a taxed entity) are exempt under the participation exemption. Dividends paid are not deductible.
Audited financial statements are mandatory where revenue exceeds AED 50 million and for every Qualifying Free Zone Person. Other businesses need proper accounts but not necessarily an audit.
Yes, by voluntary disclosure. Doing so before the FTA raises the issue avoids the incorrect-return penalty and reduces late-payment exposure.
Founder of Ashfaq and Associates, Dubai. Chartered Accountant (ICAI) with 15+ years in audit and tax across India and the UAE. About the firm →
This guide is general information based on UAE law and FTA guidance as at the update date, not professional advice. Rules change; confirm your position with a Chartered Accountant before acting.
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