UAE Corporate Tax: How the AED 375,000 Threshold Works
The AED 375,000 threshold applies to Taxable Income, not revenue. We explain the 0% and 9% rates, filing, Small Business Relief and Free Zone rules.
The statement “UAE Corporate Tax is 9% after AED 375,000” is often misunderstood. The threshold is not a revenue test, and crossing it does not suddenly make the company's entire profit taxable at 9%.
Under the standard regime, annual Taxable Income is determined first. The portion up to AED 375,000 is taxed at 0%, while 9% applies only to the portion above the threshold. Registration, filing and supporting records remain separate obligations.
0% on the portion of Taxable Income not exceeding AED 375,000 for the Tax Period;
9% on the portion of Taxable Income above AED 375,000.
If a company has Taxable Income of AED 500,000, a simplified calculation before reliefs and tax credits applies 0% to the first AED 375,000 and 9% to the AED 125,000 excess. The Corporate Tax liability is AED 11,250—not AED 45,000.
Four figures that should not be confused
Revenue is gross income from the business before expenses. It matters for rules such as Small Business Relief, but it is not the standard 0%/9% tax base.
Accounting profit or loss is the result shown in the Financial Statements after income and expenses are recognised under the applicable accounting standards.
Taxable Income is the accounting result after the adjustments required by the Corporate Tax Law. These may concern Exempt Income, expenditure that is not fully deductible, group reliefs, Tax Losses and other specified items.
Corporate Tax payable is calculated by applying the relevant rates to Taxable Income and then considering available tax credits and other applicable rules.
A bank balance, invoice turnover or accounting profit therefore does not replace a complete tax computation.
Corporate Tax is not charged on revenue: the accounting result is first converted into Taxable Income using the required adjustments.
Who is within scope
The regime covers companies and other juridical persons incorporated in the UAE, as well as certain foreign persons with a sufficient UAE connection. A UAE branch of a domestic company does not register separately from its head office.
A natural person comes within Corporate Tax only for a Business or Business Activity conducted in the UAE where total revenue from such activities exceeds AED 1 million in a calendar year. Wages, Personal Investment income and Real Estate Investment income are excluded from that test where the relevant conditions are met. This is distinct from an individual's tax residence, which is determined under separate rules.
Large multinational groups may also fall within the separate UAE Domestic Minimum Top-up Tax regime. It applies to in-scope MNE groups with consolidated global revenue of at least EUR 750 million in the specified periods and is not captured by the standard 0%/9% summary.
Registration, filing and payment are separate stages
A nil tax amount does not remove every compliance obligation. Juridical persons subject to Corporate Tax must register with the FTA and obtain a Corporate Tax Registration Number within the prescribed timeframe. The current FTA registration page also sets out the late-registration penalty and the conditions of the current waiver initiative.
Under the FTA guidance on returns and records, a Tax Return must generally be filed and Corporate Tax paid no later than nine months after the end of the relevant Tax Period. For example, a period ending on 31 December normally has a 30 September deadline in the following year unless a specific decision provides otherwise.
Records supporting the return must be retained. The FTA states a general minimum of seven years after the end of the relevant Tax Period. In practice, accounting records should do more than populate an annual form: they should allow every material tax adjustment to be reconstructed.
Small Business Relief is a different threshold
Small Business Relief uses a different measure and amount. Subject to the conditions, a Resident Person whose Revenue does not exceed AED 3 million in the current and all previous relevant Tax Periods may elect to be treated as having no Taxable Income for the elected period.
In August 2026, the Ministry of Finance extended Small Business Relief to Tax Periods ending on or before 31 December 2029. The AED 3 million Revenue threshold remains unchanged.
The relief is not automatic: an election is made for the relevant Tax Period through the return. It is unavailable to Qualifying Free Zone Persons and members of certain large MNE groups. Once Revenue has exceeded AED 3 million in a relevant period, a later fall below the threshold does not by itself restore eligibility.
Mainland and Free Zone: the licence address does not set the rate
A Free Zone company does not obtain a 0% rate on all income merely because of where it is incorporated. The first question is whether it is a Qualifying Free Zone Person and satisfies every condition of that regime.
The FTA Guide on Free Zone Persons identifies core conditions including adequate substance in the UAE, Qualifying Income, compliance with the transfer pricing rules and documentation requirements, and audited Financial Statements. Income attributable to a Permanent Establishment outside the Free Zone, certain immovable-property income, Excluded Activities and other amounts outside the regime may be taxed at 9%.
A de minimis test also applies to non-qualifying Revenue. Losing Qualifying Free Zone Person status may affect not only the current period but subsequent periods as well. A mainland-versus-Free-Zone comparison should therefore begin with the real operating model, clients, people, assets and contracts—not with “0%” in a sales proposal.
A checklist for the owner
Identify the Taxable Person. Which company or group of persons conducts the activity, and where does its UAE tax connection arise?
Fix the Tax Period. The filing deadline runs from its end, not from the first invoice date.
Build the accounting process. Separate Revenue, expenses, the accounting result and tax adjustments.
Check registration. Do not wait until a tax payment becomes due.
Assess reliefs separately. The AED 375,000 threshold, Small Business Relief and the Free Zone regime are three different mechanisms.
Prepare the evidence. Contracts, invoices, bank records, computations and resolutions should reconcile with the Financial Statements.
Review cross-border connections. Foreign branches, Related Parties, management from another country and the owner's personal position can raise additional issues.
Corporate Tax registration also does not grant the owner a visa or permission to work. The relationship between a company, immigration basis and personal status is explained in our guide to UAE residence through a company or investment.
Common mistakes
treating AED 375,000 as a Revenue threshold;
applying 9% to all Taxable Income once the threshold is crossed;
failing to register because the computation produces no tax payable;
assuming every Free Zone company is automatically tax-exempt;
merging Small Business Relief with the ordinary 0% band;
artificially separating one Business among several Persons to obtain multiple thresholds.
The Business Atlas view
The AED 375,000 threshold is a boundary within one Taxable Person's Taxable Income for one Tax Period. It is not a Revenue limit, and the first dirham above it does not turn the whole amount into income taxed at 9%.
A reliable process starts with accounting and identifying the Taxable Person, then moves through adjustments, rates and possible reliefs, and ends with registration, filing, payment and retained evidence. For a Free Zone company, the Qualifying Income analysis and every condition of the special regime must be added to that chain.
This article provides general information and is not individual tax, accounting or legal advice. Before filing a return or electing a regime, obtain advice that considers the company's structure, activities, Related Parties and actual transactions.
Tax rules, decisions, deadlines and administrative initiatives may change. Check the current Ministry of Finance and Federal Tax Authority materials before registering, filing or electing a relief.
