The UAE introduced a federal corporate tax regime for financial years starting on or after 1 June 2023. Under the main rules, the tax rate is 9 percent on taxable profit above a defined threshold. A number of legal, well-documented measures reduce taxable profit and therefore reduce corporate tax in UAE, including use of the 0 percent threshold, small business relief, qualifying free zone benefits, legitimate expense deduction, group structuring, loss carry-forward, transfer pricing compliance, and careful payroll and dividend planning. Each option has rules that must be met precisely. This blog explains each option and then shows how SSCO Global can sequence actions to save tax while keeping full compliance with UAE tax law by providing best accounting services in Dubai.
The basic facts you need to start with
Start with the baseline. Corporate tax in UAE applies to taxable persons and to most forms of business profit for financial years beginning on or after 1 June 2023. The general rule is that the first AED 375,000 of taxable income is taxed at 0 percent, and taxable income above AED 375,000 is taxed at 9 percent. This is the core rate formula every financial decision should reference.
Small businesses can access additional relief. A resident person whose annual revenue does not exceed AED 3 million may elect to be treated as having no taxable income under the Small Business Relief for a period published by the authorities. Small Business Relief is a time-limited policy.
Free zone companies can receive 0 percent on qualifying income provided they meet the tests set out for a Qualifying Free Zone Person. The rules distinguish qualifying income from non-qualifying income and require substance and compliance conditions to be met. The free zone rules aim to protect genuine free zone activity while preventing artificial routing of UAE-sourced consumption.
Loss carry-forward rules, limitations on offset, and tax grouping rules are explicitly laid out. A taxable person may carry forward tax losses to offset future taxable income, but losses cannot be carried back. In any tax period carried-forward losses may reduce taxable income by at most 75%, so you cannot eliminate 100% of profit with past losses in one year. Losses generally remain available only if the same owner(s) hold at least 50% from the loss year through the year of use; if more than 50% ownership changes, losses survive only if the business remains the same or very similar. Transfers of losses between entities are possible but tightly limited: the parties must meet common-ownership and technical tests (for example, typically ≥75% common ownership, same financial year and accounting standards, and neither can be an exempt or qualifying free zone person), and any transferred losses are still subject to the 75% utilisation cap. Tax groups let qualifying companies be treated as one taxable person so losses and profits are offset at the group level, but the group must meet strict ownership (generally ≥95%), year-end and accounting standard requirements. Lastly, all loss use or transfers require full, contemporaneous documentation and must follow the specific statutory rules and reliefs.
These are the facts you must keep visible when you design tax savings: the threshold and rates, the small business relief criteria, the structure and tests for qualifying free zone persons, the mechanics for losses, and the conditions for tax grouping. Use these facts as constraints and targets for planning.
A simple framework to reduce corporate tax in UAE
First, ensure you maximize legitimate deductions, so taxable profit shrinks. Second, use the available reliefs that best fit your profile: the 0 percent threshold, small business relief if eligible, and free zone benefits if you are based in a qualifying free zone. Third, arrange group structure and intra-group transfers to move profits in ways the law permits. Fourth, maintain rigorous documentation, accounting services in Dubai level records, and transfer pricing files so your structure withstands review. Fifth, monitor changes such as the Domestic Minimum Top-up Tax and other policy shifts and adapt. This approach balances opportunity and risk.
How to use the AED 375,000 0% threshold effectively
The simplest lever is the threshold. The first AED 375,000 taxable income is exempt. For a company with profit close to that boundary, it results in a large percentage saving. Structure operational timing so profits that legitimately arise in year X are recognized when they should be recognized. Accrual accounting and revenue timing is also very important. If SS &Co can accelerate deductible expenses or defer revenue while acting within accounting standards, the taxable income for that year may remain at or below the AED 375,000 range and be taxed at 0 percent. That reduces your corporate tax in UAE immediately.
Acquire accounting services in Dubai practices to schedule invoicing, variable compensation, or discretionary capital expenditure in a way that aligns taxable profit with the 0 percent slice where sensible. Where the business is seasonal, shift sales recognition or expense recognition within the allowed standards and use the AED 375,000 figure as a planning target.
The threshold is precise; therefore, do not rely on estimates only. Use audited or well-prepared financial statements and work with accounting services in Dubai to confirm whether profit can be kept at or under the AED 375,000 threshold. This exact figure is defined in official guidance.
Small Business Relief and how to qualify for it
Small Business Relief lets qualifying resident persons elect to be treated as having no taxable income where annual revenue does not exceed AED 3 million. This relief can be more powerful than the AED 375,000 threshold for small operators because it effectively disables corporate tax for eligible years, subject to the relief rules and time limits. Use accounting services in Dubai to confirm revenue calculations and to prepare the election documents. Confirm the election timing and whether the relief is time-limited by referencing the current ministry guidance.
Using free zone status and qualifying free zone person rules
Free zone benefits remain among the most powerful ways to lower corporate tax in UAE, but they require precise compliance. A Qualifying Free Zone Person may benefit from a 0 percent rate on qualifying income. Qualifying income is income that meets the criteria set out in cabinet decisions and ministry guidelines. The law clearly differentiates qualifying income from income that is local-market facing or derived from activities that do not meet the free zone tests. To retain the 0 percent treatment you must maintain substance, demonstrate operational activity inside the free zone, and ensure the revenues classed as qualifying meet the definition.
Maximize deductible expenses and depreciation
Lower taxable profit by increasing legitimate deductible charges. The corporate tax rules allow ordinary business expenses, salaries, rent, utilities, travel, professional fees, and so on, to be deducted when they meet the normal matching tests. Capital allowances and depreciation reduce taxable income over time. Companies should strategically plan their capital expenditures for tax benefits during years that create opportunities to reach a 0 percent tax threshold or which decrease their liability to the 9 percent tax bracket.
Expense acceleration must align with accounting policies and the underlying business needs. Accounting services in Dubai will help you apply the right accounting standard, choose a depreciation basis consistent with financial statements, and document the business purpose for investments.
Claim interest deductions where the rules permit, but check limits and related-party rules. Transfer pricing rules and thin capitalization or limits on related-party interest deduction may apply, so align interest strategies with the transfer pricing documentation and the official guidance.
Group structuring and tax groups
UAE rules allow a qualifying group to elect tax grouping relief so that transfers within the group are tax neutral, and tax losses or profits can be allocated in a way consistent with the guidance. The published tax groups guide lists the qualification rules, the required ownership thresholds, and the mechanics for relief. Group relief can prevent double taxation on internal reorganizations and can centralize profit and loss of management. Use this tool when your group ownership meets the stated conditions and when consolidation produces a legal and commercial benefit.
Accounting services in Dubai can help handle consolidation effectively. Where one group member has losses and another has profit, a tax group, properly established, can deliver immediate tax value by offsetting those outcomes under the ministerial decisions.
Payroll planning, owner compensation, and dividends
For owner-managed firms, consider how to split owner remuneration between salary (which is usually deductible for the company) and dividends (which are typically not taxed at the personal level in the UAE). Paying a reasonable salary lowers corporate profit and can reduce corporate tax in UAE. However, a salary must reflect market rates and genuine work. Use accounting services in Dubai to document salary structures and to ensure payroll taxes or social security implications in other jurisdictions are included in the analysis.
Dividends and profit distributions do not create a corporate deduction. Therefore the balance between salary and dividends influences taxable profit directly. When owners are also tax residents in other countries, seek international tax advice to avoid unanticipated personal tax exposure.
R&D and employment incentives on the horizon
The United Arab Emirates announced new incentives which will include refundable research and development credits that will start in 2026 and special employment credits for high value positions. The proposed measures require both legislative approval and the completion of final design work. The ministry notices and economic briefings serve as the sources to track these upcoming developments. When available, any well-designed R&D credit can lower effective tax and encourage capital investments. Use accounting services in Dubai to track eligible R&D spend and prepare the documentation the authorities will require.
Common pitfalls and how to avoid them
A number of recurring errors increase tax exposure. First, artificial free zone arrangements without substance attract scrutiny. Free zone benefits require real operations, not just a mailbox. Second, poor transfer pricing documentation leads to adjustments that increase taxable profit. Third, administrative penalties will result from both the failure to register and the failure to file documents on their required schedule. Fourth, tax authorities will recharacterize financial assets when businesses use aggressive valuation methods without sufficient commercial justification. Accounting services in Dubai with experience in UAE corporate tax help avoid these pitfalls.
To avoid problems, document every decision, link tax choices to commercial drivers, and keep conservative positions where facts are ambiguous. The authorities favor positions backed by evidence and coherent commercial narratives.
Closing Note
If you follow these steps you will use the main legal levers to save corporate tax in UAE while staying compliant. The numbers the ministry and FTA publish are precise and must drive your calculations. Work with local accounting services in Dubai that have experience with the UAE corporate tax law and the FTA guidance and that understand how to document substance and transfer pricing.
FAQ’s
What is the corporate tax rate in the UAE?
The general headline is that taxable income above AED 375,000 is taxed at 9 percent and the first AED 375,000 is taxed at 0 percent.
Does a free zone company always pay zero tax?
No. A Qualifying Free Zone Person pays 0 percent on qualifying income only if it meets the tests in the cabinet decisions and ministry guidance. Non-qualifying income is taxed at 9 percent. Substance is required.
Can I carry forward losses indefinitely?
Losses can be carried forward subject to the rules in the corporate tax law and implementing decisions. The law limits the offset each year and applies special tests on ownership changes.
What is Small Business Relief in UAE?
If a company’s revenue is AED 3 million or less, it can apply for Small Business Relief. This means the business is treated as having no taxable income, so corporate tax becomes zero for that period (if conditions are met).
Who should I hire to implement this?
Use accounting services in Dubai with UAE corporate tax experience. They will combine financial modeling, statutory accounting, and tax filing experience in one team.
What happens if company ownership changes?
If more than 50% ownership changes, losses can still be used only if the business remains the same or similar. Otherwise, losses may be restricted.
