UAE Corporate Tax kicked in on 1 June 2023. Three years later, most UAE founders we talk to still don't have a clear answer to the simplest question: do I have to pay it, and how much? This piece is the briefing I wish I'd had on day one.
Who is actually in scope
Corporate Tax applies to almost every business operating in the UAE — onshore mainland, free-zone, even branches of foreign companies. The exemptions you've probably heard about are narrower than they sound.
- You are in scope if you have a UAE trade licence, a UAE branch, or you're a UAE-resident sole trader earning more than AED 1M/year of business revenue.
- You are out of scope if you earn purely personal income (salary, dividends from your own holding company, real estate rented in your personal name) — but only if there's no business activity behind it.
- Free zone businesses are in scope, but may qualify for a 0% rate if they meet the QFZP tests.
If your business issued a single invoice in 2024 or later, you almost certainly need to file. Filing is required even if your tax owed is AED 0. The penalty for not registering is AED 10,000.
The AED 375,000 threshold
This is the single most important number, and it's almost universally misunderstood. The 9% rate applies only to taxable income above AED 375,000. Below that, the rate is 0%.
| Bracket | Income | Rate | Tax |
|---|---|---|---|
| First AED 375,000 | 375,000 | 0% | 0.00 |
| Above AED 375,000 | 125,000 | 9% | 11,250.00 |
| Total CT due | 500,000.00 | 11,250.00 |
Effective rate on this example: 2.25%. Not 9%. Most SMEs pay an effective rate well below 9%.
QFZP: the free-zone 0% rate, properly explained
Free-zone businesses can keep paying 0% — but only if they pass the Qualifying Free Zone Person tests. Failing by 1 dirham costs you the 0% rate for the entire year.
| Test | What it actually means |
|---|---|
| Qualifying income | Revenue from qualifying activities — manufacturing, logistics, holding shares. List is FTA-published. |
| Adequate substance | Real office space, real employees, real activity. A PO box and a virtual desk don't count. |
| Audited accounts | Annual audit by a UAE-approved auditor. No exceptions. |
| De-minimis on non-qualifying | Less than 5% of revenue (or AED 5M) from non-qualifying activities. Cross this and you lose 0% for the year. |
The 5% de-minimis is calculated on gross revenue, not net. We have customers who almost lost QFZP status because of AED 80k of advisory side-revenue.
"The single biggest mistake we see is treating Corporate Tax like it's just VAT on profit. It isn't — the adjustments matter, and they're where AED 50k–100k of liability quietly accumulates."
What to do next
- Use the Watin tax calculator to get your effective rate in 30 seconds.
- Validate your TRN status with the TRN validator. If you're not registered, register today.
- If you're free-zone, ask your accountant about QFZP tests now — not at year end.
And if you'd rather not think about any of this again — try Watin for 14 days, free. We do the maths so you don't have to.