Is your company liable for corporate tax? And how do the rules differ between the mainland and free zones? Before making any business decision in 2026, this guide gives you the full picture.
What Is UAE Corporate Tax?
Overview
UAE corporate tax is a federal tax applied to business profits. It was enacted under Federal Decree-Law No. 47 of 2022 and came into effect for most businesses from financial years starting on or after 1 June 2023. In 2026, the system is firmly established — and compliance is not optional.
Who Is Subject to Corporate Tax?
Taxable Persons
- Companies registered on the UAE mainland
- Foreign companies conducting regular and continuous business activity in the UAE
- Individuals conducting licensed business activity
- Free zone companies — under specific conditions
Exempt Persons
- Government entities and government bodies
- Wholly government-owned companies listed on official registers
- Natural resource extraction activities
- Approved investment funds
- Qualifying free zone companies on qualifying income
Tax Rate Structure
Applicable Rates
- 0% on taxable profits not exceeding AED 375,000 per year
- 9% on taxable profits exceeding AED 375,000 per year
- 0% on qualifying income for free zone companies under specific conditions
- 15% for large multinational companies with global annual revenue exceeding EUR 750 million
Mainland vs. Free Zone: The Key Difference
Mainland Companies
Mainland companies are fully subject to corporate tax at the rates above. There are no location-based exemptions — tax is calculated on net profit after deducting approved expenses.
Deductible expenses include:
- Employee salaries and wages
- Office and facility rent
- Direct operating costs
- Bank interest within prescribed limits
- Depreciation and amortization under approved rules
Free Zone Companies
Free zone companies receive different tax treatment — but under precise conditions. Known as “Qualifying Free Zone Persons,” they benefit from a 0% rate on qualifying income, while non-qualifying income is subject to the standard 9% rate.
What Is Qualifying Income in Free Zones?
Qualifying Income Conditions
For a free zone company to benefit from the 0% rate, all of the following must be met:
- Maintain adequate substance within the free zone
- Earn income from transactions with other free zone companies or from outside the UAE — not from the mainland
- Not elect to be subject to the standard 9% rate
- Meet all compliance and financial reporting requirements
Non-Qualifying Income (Subject to 9%)
- Income from transactions with mainland customers
- Income from certain specified services that do not qualify
- Income from real estate assets on the mainland
Registration and Filing Requirements
Who Must Register?
All companies subject to corporate tax must register with the Federal Tax Authority — including free zone companies with non-qualifying income. Registration is done through the Federal Tax Authority’s electronic portal (EmaraTax).
Filing Deadlines
- Annual tax return must be filed within 9 months from the end of the company’s financial year
- Tax payment is due on the same deadline
- Late registration or filing results in daily penalties
VAT and Its Relationship to Corporate Tax
Two Separate Taxes
Corporate tax and VAT (5%) are completely independent taxes:
- VAT: applied to sales and services, collected from the customer
- Corporate tax: applied to the company’s net profit
Being subject to one does not necessarily mean being subject to the other — but most active businesses are subject to both.
Important Points Not to Overlook
Essential Warnings
- Holding companies and related groups are subject to special transfer pricing rules
- Transactions between related parties must follow the Arm’s Length principle
- Tax losses can be carried forward to future years under prescribed conditions
- Free zone companies conducting any activity on the mainland may lose their exemption eligibility entirely
- Engaging a certified tax advisor is a necessity, not a luxury
Let AAMER Handle Your Tax Compliance Procedures
How AAMER Simplifies the Process
AAMER Logistics supports you in all corporate compliance matters — from tax registration and file organization, to specialist coordination and ensuring your returns are filed on time. Their digital platform and expert team protect your company from penalties and save you time and effort. Learn more about corporate compliance services.
Start Compliance Today
Tax is a reality — and companies that prepare early protect themselves and focus on growth. Download the AAMER App and make sure your company is correctly compliant in 2026.