How much tax you pay for your business depends on a few facts: whether your company is a taxable person in the UAE, what your taxable profit is, whether any part of the business qualifies for free zone or special-regime treatment, and whether your group is subject to the global minimum top-up tax. The UAE applies 0 percent to the first AED 375,000 of taxable income and 9 percent to amounts above that threshold, while very large multinationals may face a domestic top-up to reach an effective 15 percent. Getting the taxable income right requires consistent accounting, documented substance, and many business owners work with tax consultants in Dubai and trusted corporate tax services to make the calculation repeatable and defensible. This blog explain some basic taxes that a business in UAE is subject to.
Who is subject to Corporate Tax in the UAE
A business becomes a taxable person when it meets the definition in the Corporate Tax Law and when it carries on activities that generate taxable income in the UAE. Resident companies that are incorporated in the UAE are generally subject to tax on their worldwide profits. Non-resident entities are subject to tax on profit attributable to a permanent establishment in the UAE or on income sourced in the UAE. The Federal Tax Authority publishes guidance explaining registration, filing, and documentation requirements and the tests that determine taxable status.
Headline corporate tax rates and the simple calculation
The headline structure is easy to state and essential to remember. The law treats the first AED 375,000 annual taxable income at a zero percent rate and taxes taxable income above AED 375,000 at nine percent. That split means small profits face no corporate tax while larger profits are taxed at a single, low rate above the threshold. For many businesses, this simple tier is the dominant driver of the tax bill. For example, where taxable income in a single year is AED 500,000, the tax is computed on the AED 125,000 above the threshold at 9 percent, producing a tax charge of AED 11,250. The FTA corporate tax guide sets out worked examples and practical calculation steps for finance teams and for firms offering corporate tax services.
How taxable income is determined in practice
Taxable income is the net number after allowable deductions and adjustments. The starting point is accounting profit as prepared under the applicable financial reporting framework, usually IFRS. From accounting profit, specific tax adjustments are made for items the law treats differently: non-taxable income, non-deductible expenses, depreciation and amortisation timing differences, interest limitation adjustments, and other adjustments prescribed by the law. Businesses need robust reconciliations between accounting profit and taxable income. That reconciliation is the single most common place where errors cause unexpected tax bills. Good corporate tax services include standardized reconciliation templates and reviews that map every line in the financial statements to the tax return.
Free zones and qualifying income
Free zones remain commercially attractive and the corporate tax framework offers a way for qualifying free zone entities to benefit from a 0 percent effective rate on qualifying income, subject to clear tests. The tests are operational and require evidence of substance: employees working in the zone, premises, and genuine decision-making. The relief only covers qualifying income; other sources of income may be taxable at the standard rates. The FTA issued a detailed guide covering the qualifying conditions and the list of activities that are eligible and those that are excluded. Businesses operating in free zones routinely engage tax consultants in Dubai for assessments of qualification because the evidence must be practical and defensible.
Domestic minimum top-up tax and very large multinationals
Large multinational groups that meet the international revenue threshold are affected by a domestic minimum top-up tax that ensures a minimum effective rate of 15 percent in the UAE. The threshold that triggers these rules is aligned with the internationally agreed threshold, which is consolidated global revenues of at least €750 million in two of the past four financial years. When the group’s effective tax rate in the UAE falls below 15 percent on certain low-taxed profits, the domestic top-up tax applies to bring the effective rate up to the minimum. This is an important consideration for groups with significant cross-border flows and for those that previously relied on low-tax jurisdictions. Specialists use company-level and group-level models to calculate expected top-up exposure and to design compliant reporting.
Deductions and limits to deductions
Deductions reduce taxable income, but some are limited by specific rules. Interest expense is subject to an interest limitation that follows international norms and caps deductibility in certain circumstances. It is the tax regulations which would determine specific schedules used to calculate depreciation and capital allowances by businesses. Related-party payments require careful documentation. The tax base increases through adjustments which result from related-party payments that do not follow arm’s length standards. Businesses need to establish transfer pricing rules which require them to document their intercompany agreements when they make domestic and international payments. Tax consultants in Dubai regularly implement policies that both reflect commercial reality and meet the documentation requirements the FTA expects.
Withholding taxes and treaty relief
Although the UAE does not currently impose broad withholding taxes on outbound payments in the way some jurisdictions do, cross-border payments and treaty networks matter for groups. Where withholding obligations exist in counterparty jurisdictions, the corporate tax position in the UAE can be affected indirectly through foreign tax credits and treaty claims. For groups with complex supplier relationships, the interaction of foreign tax rules with UAE tax requires specialist modelling. Corporate tax services typically coordinate with international advisers to make sure reliefs are claimed where appropriate.
Transfer pricing and related-party pricing
Transfer pricing is a parallel requirement that governs related-party transactions. Prices between related entities should reflect arm’s length outcomes. The FTA expects documentation that supports those prices. When transfer pricing adjustments occur, they can alter the taxable income reported in the UAE. Preparing a defensible transfer pricing policy, benchmarking studies, and contemporaneous documentation is now part of routine compliance for many trading and service groups. Tax consultants in Dubai with transfer pricing expertise are frequently engaged to prepare the master file and local file and to run comparables.
Interaction with VAT, payroll taxes and other levies
Corporate tax sits alongside VAT and payroll-related obligations. VAT remains a transactional tax on supplies and affects cash flow. VAT does not typically reduce taxable profit for corporate tax purposes except where input VAT is not recoverable and is treated as part of the cost base. Payroll matters for substance tests, particularly for free zone qualification. Accounting teams need integrated processes so that payroll, VAT and corporate tax positions reconcile and do not conflict. Many businesses use corporate tax services that bundle payroll and VAT compliance with tax advisory to reduce reconciliation mismatches and administrative gaps.
Timing, registration, returns and penalties
Companies required to register must do so and must file returns and pay tax according to the timelines published by the FTA. The law prescribes deadlines and the authority sets out the required forms and attachments. Administrative penalties exist for late registration and late filing, and the Cabinet Decision on penalties provides the concrete amounts and the monthly escalation rules. For example, a late declaration may attract AED 500 per month for the first 12 months and AED 1,000 per month thereafter, with specific higher penalties for some violations. The FTA also operates penalty waiver processes in defined circumstances when returns are filed within prescribed cure periods. Businesses planning compliance calendars usually rely on corporate tax services to maintain filing discipline and to reduce the risk of penalties.
Practical checklist to estimate your likely tax bill
To estimate how much tax you will pay, follow a short, repeatable process. First, determine whether your business is a taxable person under the law and whether the tax period is the company’s financial year. Second, calculate accounting profit and then prepare the reconciliation to taxable income by applying the tax adjustments required by law. Third, apply the tiered rates to the taxable income. Fourth, consider credits such as foreign tax credits. Fifth, review whether any part of your business qualifies for free zone treatment or triggers the domestic top-up tax. Many companies use tax consultants in Dubai to perform this checklist the first time so the internal team can then run the same steps periodically. Corporate tax services typically offer packaged calculations so clients receive a clear projected tax bill and a supporting reconciliation for audit purposes.
When the domestic minimum top-up tax affects the result
Choosing the right advisor and the role of tax consultants in Dubai
The right adviser explains calculations in plain language, produces the reconciliation pack, and helps implement processes that make the calculation repeatable. Tax consultants in Dubai vary widely in capability, and the best firms combine local FTA experience with global tax technical depth. When you evaluate providers of corporate tax services, ask for sample calculation templates, a timeline for implementation, and references from similar-sized clients in your sector.
Conclusion and next step
How much tax you pay depends on taxable profits, the operation’s structure, free zone qualification, and whether your group falls under global minimum tax rules. The arithmetic is simple once the taxable income is correct, but preparing that taxable income requires precision and documentation. Many businesses find that engaging tax consultants in Dubai and subscribing to comprehensive corporate tax services reduces risk and produces a predictable cash tax outcome.
FAQ’s
- Are salaries deductible as expenses?
Salaries paid to employees are generally deductible if they are genuine business expenses and properly documented in payroll and contracts. - How is corporate tax different from VAT?
VAT is a transactional tax on sales and purchases and affects cash flow, while corporate tax is charged on profit; they are separate, and both can apply to the same business. - What happens if I miss the filing deadline?
Late filings can attract administrative penalties and interest; the FTA publishes specific penalty amounts and deadlines, so timely filings matter. - Can I claim foreign tax paid against UAE tax?
You can usually claim credit for tax you already paid in another country, so you do not pay tax on the same income twice.
- Which legal methods exist for me to reduce my tax obligations?
One can always decrease taxes by claiming legitimate business expenses, establishing a company in a fiscally prudent way, using incentives in a free zone (if eligible), and by keeping good financial information.
About the Author:
Sana Fatima
Sana Fatima is the author of this piece of writing and an aspiring Chartered Accountant. She possesses practical knowledge in finance, accounting, taxation, audit, and business law dynamics. She uses her skills to translate difficult tax and accounting subjects into comprehensive materials. Her writing helps business teams and non-specialists understand the rules which govern their work.
