Understanding Tax in the UAE - From Zero Tax to Corporate Reality

Tax in the UAE: What every Business needs to know

The UAE’s reputation as a low-tax environment remains intact, but the rules have matured. Today’s system balances global transparency standards with incentives for growth. Whether you operate on the mainland or in a free zone, you now face real reporting requirements that must be understood from the outset.

Corporate Tax Overview

Corporate tax applies to financial years beginning on or after 1 June 2023. The rate is 0% on taxable income up to AED 375,000 and 9% above that. Large multinational groups with revenue exceeding EUR 750 million are also subject to a 15% domestic minimum top-up tax from 2025.

Taxable entities must register with the Federal Tax Authority, maintain IFRS-compliant accounts, and file a corporate tax return within nine months of their year-end. Even if your tax is nil, registration and filing are mandatory.

Free Zone Benefits and the QFZP Regime

Free zone companies may qualify for a 0% rate on “qualifying income.” To stay eligible, they must:

• Earn only qualifying revenue or stay within the de minimis threshold (the lower of 5% or AED 5 million of total income).

• Maintain audited financial statements.

• Meet substance requirements and transact only with permitted parties.

Non-qualifying income is taxed at 9%, and failing to comply removes the exemption for the entire year. Treat the 0% rate as something to be proven, not assumed.

Transfer Pricing and Related-Party Rules

Businesses that are part of groups or have related-party transactions must document pricing policies under OECD principles. Companies with revenue above AED 200 million or that belong to multinational groups must prepare master and local files and disclose relationships in their tax return. Documentation should be ready within 30 days of request.

VAT in the UAE

The VAT rate remains 5%, with mandatory registration once taxable turnover exceeds AED 375,000 in a 12-month period. Voluntary registration is available from AED 187,500. Non-resident suppliers making taxable sales in the UAE must register regardless of threshold.

Designated Zones apply special VAT rules for goods, treating them as outside the UAE when strict customs-control conditions are met. Services, however, are always within scope. Most businesses file quarterly VAT returns through EmaraTax and must retain records for at least five years.

Excise and Customs Duties

Excise tax applies to specific products such as tobacco, energy drinks, and sweetened beverages, with rates up to 100%. A sugar-content-based model for soft drinks is expected from 2026.
Customs duty on most imports is 5% of CIF value, though goods stored in free zones are normally exempt until moved into the mainland.

Economic Substance and Reporting

Entities performing defined activities, such as distribution, headquarters, intellectual-property, or financing functions. must file annual ESR notifications and, where applicable, substance reports. Adequate presence in the UAE (people, office, and expenditure) is required to remain compliant.

Payroll and WPS

Companies registered with the Ministry of Human Resources and Emiratisation must pay employees via the Wage Protection System. Late or missing payments trigger penalties and licence restrictions. This applies even in many free zones that use MOHRE for visa management.

Personal Taxation

There is no personal income tax on employment income in the UAE. However, individuals earning more than AED 1 million a year from business or freelance activities must register for corporate tax as natural persons carrying on a business. Investment and property income generally remain outside scope.

Building a Tax-Ready Business

Compliance in the UAE now means more than holding a licence. Keep accurate books under IFRS, reconcile VAT and CT data monthly, and plan ahead for your nine-month filing deadlines.
Even if you operate across free zones or internationally, aligning your reporting systems early protects your zero-tax advantages and avoids costly corrections later.

Final Thoughts

The UAE remains a low-tax jurisdiction, but it is no longer paperwork-free. Understanding the difference between incentives and obligations is what separates compliant companies from those constantly catching up. A well-managed tax framework not only avoids penalties but also reassures banks, investors, and global partners that your structure is sound.

References – Understanding Tax in the UAE

• UAE Ministry of Finance – Corporate Tax Overview
  https://mof.gov.ae/en/resourcesandbudget/federal-tax-authority/Pages/Corporate-Tax.aspx

• UAE Federal Tax Authority (FTA) – Corporate Tax and VAT guides and registration portal (EmaraTax)
  https://tax.gov.ae

• Cabinet Decision No. 100 of 2023 – Qualifying Free Zone Person regime (QFZP)
  https://mof.gov.ae

• Ministerial Decision No. 265 of 2023 – Qualifying and Excluded Activities for Free Zone Tax
  https://mof.gov.ae

• Ministerial Decision No. 114 of 2023 – Small Business Relief for Corporate Tax
  https://mof.gov.ae

• UAE Ministry of Finance – Transfer Pricing Documentation Requirements
  https://mof.gov.ae/en/policies/Pages/transfer-pricing.aspx

• UAE Ministry of Finance – Economic Substance Regulations (ESR) guidance
  https://mof.gov.ae/en/strategic-partnerships/initiatives/Pages/economic-substance.aspx

• Federal Tax Authority – Value Added Tax (VAT) registration thresholds and returns
  https://tax.gov.ae/en/vat

• UAE Government Portal – Excise tax on tobacco, energy drinks, and sweetened beverages
  https://u.ae/en/information-and-services/finance-and-investment/taxation/excise-tax

• UAE Government Portal – Customs duties and import procedures
  https://u.ae/en/information-and-services/business/import-export

• Reuters – UAE adopts 15% domestic minimum top-up tax for large multinationals (2025)
  https://www.reuters.com

This article by Antravia is general information, not advice. Regulations evolve quickly (especially CT, QFZP, and excise). Verify key positions against the primary sources below or with a locally licensed advisor.