How to calculate corporate tax in UAE

Understanding the UAE Corporate Tax Rate

The UAE, with its vibrant business landscape, has implemented a new corporate tax regime effective 1 June 2023 under the Federal decree law no. 47. In order to create a fair and seamless transition, the Ministry of Finance and Federal Tax Authority (FTA) have devised a more nuanced federal corporate tax regime, including specialized incentives based on tax profiles.

UAE corporate tax rates applies a tiered rate structure based on threshold and tax brackets of the resident taxable person and non resident juridical persons. Here’s an overview of rates for UAE:

Type of Company	Tax Brackets	Notes
Taxable persons	0% on Taxable income up to AED 375,000 9% on Taxable Income exceeding AED 375,000	The rates are applied after taxable income is calculated and any exception or reliefs are considered.
Qualifying Free Zone Persons (QFZP)	0% tax rate on qualifying income – Transactions with other Free Zone entities (subject to exclusions) – Income from Qualifying Activities – Qualifying Intellectual Property – Other income within de minimis limits 9% tax rate on non qualifying income including: – Income from Domestic or Foreign Permanent Establishments – Certain real estate income – Non-qualifying IP income	Free Zone entities must meet ongoing conditions to qualify for their Qualified Free Zone Persons status, which means: 1. Business should be registered and operating in a UAE Free Zone 2. Adequate economic substance within the Free ZoneIncome must fall within qualifying categories 3. Non qualifying revenue has to stay below de minimis limits 4. Transfer pricing regulations and documentation apply 5. Audited financial statements are required 5. Required to file returns even on 0% taxable income Losing QFZP status has multi-year consequences (current year where status is lost + following 4 years — total of 5 years.)
Corporate Tax Groups	A tax group is taxed exactly like a normal taxable person: – 0% on the first AED 375,000 of group taxable income – 9% on the remaining taxable income	Two or more UAE-resident companies to be treated as a single taxable person for corporate tax purposes, subject to approval by the Federal Tax Authority (FTA). 1. One parent company + one or more controlled UAE subsidiaries wherein parent must hold > 95% (share capital, voting rights, profits/net assets) 2. Tax group files one return via parent 3. Files one consolidated corporate tax return via parent company, who acts as the representative member 4. All members are jointly and severally liable for tax obligations

What is the de minimis requirement?

Under UAE corporate tax law, a free zone company is treated as QFZP if they fulfill certain conditions, and earns not more than a certain amount of non qualifying revenue.

The de minimis rule sets the threshold wherein Free Zone businesses can retain their QFZP status as long as the non qualifying income does not exceed the lower of AED 5 million or 5% of total revenue, ensuring that all other conditions and requirements are intact.

Once they exceed the tolerated amount, the company will lose their current status within this tax period AND cannot apply for the 0% QFZP regime from the beginning of the relevant tax period and for the subsequent 4 taxation periods, even if income becomes fully “qualifying” again.

Examples	Revenue Threshold	QFZP Status
Small Company	Total revenue: AED 2,000,000 – 5% of revenue: AED 100,000 – AED 5,000,000 cap: irrelevant (higher) De minimis threshold = AED 100,000	If non qualifying revenue is: AED 80,000 → ✔️ QFZP status retained, considering other requirements are fulfilled AED 120,000 → ✖️ QFZP status lost
Larger Company	Total revenue: AED 200,000,000 – 5% of revenue: AED 10,000,000 – AED 5,000,000 cap applies (lower) De minimis threshold = AED 5,000,000	If non qualifying revenue is: AED 4,900,000 → ✔️ QFZP status retained, considering other requirements are fulfilled AED 5,100,000 → ✖️ QFZP status lost

What is exempted from corporate tax calculated?

To further explain this, let’s break it down into two parts: what constitutes exempt income and exempt persons within the UAE CT regime?

Key Points under UAE Tax Laws	Exempt Income	Exempt Persons under CT LAW
What is exempted?	1. Employment income (salary and wages) 2. Personal investment income not connected to a business 3. Capital gains and losses from the sale, transfer or disposal from a participating interest 4. Dividends received from a foreign juridical person are exempt only if the Participation Exemption conditions are met, including: — Minimum ownership (≥5%) or acquisition cost ≥ AED 4 million — Minimum holding period (12 months, or intent to hold) — Subject-to-tax test (foreign tax ≥9% or deemed satisfied) Other specific examples: 1. Qualifying dividends from qualifying shareholdings; capital gains from selling qualifying shares 2. Foreign permanent establishment (PE) income (i.e. foreign taxes paid abroad and PE exemptions) 3. Qualifying intra-group transactions and reorganizations (i.e. asset transfers, internal restructurings) 4. Certain refunds, recoveries and windfalls (i.e. insurance recoveries, refunds or reimbursements, court awards to compensate for losses)	1. Persons or businesses specifically exempt under the law (e.g. certain government entities) 2. Public benefit entities Specifically: 1. Wholly-owned or controlled UAE subsidiaries of government controlled entities are usually considered as exempt persons unless they conduct commercial activities. 2. Certain extractive businesses (e.g., natural resource extraction) and qualifying public benefit entities can get exemptions if conditions are met. Particularly, businesses engaged in the extraction of natural resources are exempt from CT as these businesses will remain subject to the current Emirate level corporate taxation. 3. Other activities like pension funds, social security funds, and qualifying investment funds may be exempt based on regulatory conditions.
How do you treat this in practice?	Income is excluded, but the person is still considered under the corporate tax system	The person is not considered as a taxable person. Meaning, they are outside of scope within corporate tax regime, so they have no taxable income calculation at all.

Key Components of Taxable Income Calculation

Corporate tax is calculated based on Taxable income earned within the tax period. Taxable income generally starts from business profits as shown in their financials. UAE businesses generally follow International Financial Reporting Standards (IFRS) as the accepted accounting framework and follow these global tax standards for preparing financial statements.

Accounting profit is the net profit shown in a company’s financial statements, calculated under IFRS accounting standards, and is the starting point for determining taxable income. With a few tax adjustments, their net profit is then recalculated to arrive at taxable income.

Understanding Taxable Income and Corporate Tax Payable

To simplify the manual process for “UAE’s corporate tax calculator”, you can think of taxable income as the amount of what you earned that the government considers taxable. From there, the amount you need to actually pay becomes your tax liability.

You can have taxable income and still end up with very little to none owed liabilities to the government. This happens as the final amount of corporate tax payable once:

• You apply the relevant tax rates (0% and 9%), and
• Take into account any applicable exemptions or reliefs

It might also help to familiarize yourself with other terms you’ll encounter when fulfilling your tax obligations:

Terminology	Definition	Where it applies in corporate tax calculation
Taxable Persons	An individual or entity required to comply with UAE Corporate Tax regime because they carry on a business and related activities	Primarily their business income fuel the CT regime and UAE economy as a result
Direct Tax Levied	Direct tax levied refers to a tax that is charged directly on income or profits of a person or business. It is not embedded in prices or passed along invisibly through sales or pricing.	Corporate tax is considered an example of direct taxation on businesses.
Withholding tax	A structure where tax is deducted at source and paid to the tax authority on behalf of the taxpayer.	N/A – withholding tax affects cash flow and credits. Depending on the situation, this tax may reduce the cash you receive; be claimed as foreign tax credit, or ignored entirely.
Tax Loss Relief	Tax loss relief allows a business that makes a loss in one tax period to use that loss to reduce taxable profits in future periods	This reduces future corporate tax payables by offsetting the loss against future taxable income. In any given future tax period (including 2026), a business can use carried-forward losses to reduce up to 75% of that year’s taxable income before tax. The remainder of taxable income is taxed normally. Example 2026 Taxable profit: AED 100,000 Loss from prior years: AED 200,000 Maximum offset: 75% of AED 100,000 = AED 75,000 Taxable income after relief: AED 25,000 (now subject to CT)
Tax Period	The financial year for which corporate tax is calculated and reported	Make sure you are computing and filing for the correct period to avoid penalties
Related Party Transactions	Transactions between connected persons or entities that require special pricing and documentation rules	These rules ensure that taxable income reflects market-based profits, not profits shifted artificially between related entities. In practice, they can increase or decrease taxable income through tax adjustments.
Transfer Pricing Documentation	These are rules and documents governing how prices are set between related parties to ensure transactions reflect market value	Transfer pricing documentation: – Justifies how prices were set – Supports that transactions are arm’s length – Protects your tax computation from being challenged If documentation supports arm’s length pricing, then your tax computation stands as filed. If documentation is missing or weak, the Federal Tax Authority may recharacterize transactions, adjust income or expenses, and increase taxable income.
Arm’s Length Principle	The requirement that related party transactions must be priced as if between independent parties	This applies not just to large companies, but also to: 1. Founders paying themselves 2. Shared services across entities 3. IP licensing between related companies Size is not an exemption for this principle.

Step-by-Step Corporate Tax Calculation

Here’s the step by step guide for corporate tax calculation under UAE CT Law:

Step 1: Determine accounting or net profit before corporation tax

1. Use net profit from standalone financial statements specifically prepared for the relevant financial year
2. Example:
   • Accounting or net profit before tax from current period from business activities: AED 500,000

Step 2: Apply tax adjustments and other applicable deductions

1. Add back nondeductible expenses
   • Government fines, late filing and compliance penalties
   • Personal expenses paid by the company
   • Dividends and profit distributions
   • Inflated management fees or above market salaries (i.e. result of excessive or not following the arm’s length principles)
   • Charitable donations or sponsorships framed as donations
2. Remove exempt income (if applicable)
3. Apply reliefs or exemptions allowed under the law
   • Previous year allowed tax loss relief
   • Exempt income categories
4. Example:
   • Non-deductible expenses added back: AED 30,000
   • Previous year relief: AED 10,000

Step 3: Calculate taxable income

1. Result after all adjustments;
2. This is the point where if you incur and record a loss, you become eligible for tax loss relief
3. Resulting example:
   • Adjusted taxable income: AED 520,000

Step 4: Apply corporate tax rates

• 0% on first AED 375,000 of taxable income
• 9% on the remaining taxable income
• Example (Tax calculation)
  • 0% on first AED 375,000 → AED 0
  • 9% on remaining AED 145,000 (AED 520,000 – 375,000)→ AED 13,050

Step 5: Determine tax liability

• Total Corporate Tax payable for the tax period
• Example:
  • AED 0 + AED 13,050 = AED 13,050
  • ✅ Final Corporate Tax payable: AED 13,050

Step 6: Calculate your net income after taxes

To ensure your books are clear and up to date, it is best practice to also calculate your profit after taxes.

What happens if I have a negative taxable income?

In the event that you record a loss in your filed returns, you can claim it by adding in the Corporate Tax return itself.

To claim tax loss relief in 2026 and beyond, the following conditions must be met:

• The same person(s) must hold at least 50% ownership of the business from the loss year to the year it is used; OR
• If ownership changes by more than 50%, the business must continue the same or similar activity.
• There is no need for separate application, you just need to reflect it when filing.

In order to claim it, you must:

1. Prepare financial statements and compute the taxable income. Make sure the computation is well documented to ensure that the negative taxable income is accepted by FTA as your tax loss.
2. When filing the corporate tax return with the Federal Tax Authority, you report the loss in the period where it occurred, specifically under the return fields for “Tax Loss Carryforward”
3. Once a loss is recognized in your filed returns, it automatically becomes available to use in future profitable years.
   
   Include it in your next corporation tax filing, report the loss year in your return, and maintain the documentation (i.e. calculation worksheets, audited financials, supporting invoices and ledgers; and ownership records to satisfy the continuity requirement) to qualify.

Calculation Examples

Here is a summary of the calculation formula that applies to majority of companies under the standard tax regime, including tax calculator examples and some specific conditions that add a complexity layer into how a taxable person’s accounting income is calculated.

The formula follows all taxable persons, including freelancers, free zone entities, and entities earning worldwide income (i.e. all income a person or business earns anywhere globally, and not just within UAE).

Type of Example	Description of Context	Computation	Note
Freelancer monetizing multiple income streams Important note: if you’re a natural person with turnover ≤ AED 1 million, CT does not apply at all. A natural person may also elect a Small Business Relief if turnover/revenue ≤ AED 3 million, subject to conditions (check our guide here).	Sample income streams: ✔️ Monthly client retainer for A, B, and C: AED 920,000 ✖️ Salary income of AED 15,000 ✖️ Income on dividends and savings: AED 30,000 ✔️ One-off strategy project: AED 90,000 ✔️ Paid online workshop (self created): AED 80,000 ✔️ Speaking honorarium related to business opportunity: AED 30,000 TOTAL BUSINESS INCOME: AED 1,120,000 Expenses Deductible expenses (marketing, subscriptions, co-working): AED 140,000 Nondeductible expenses: AED 40,000 total Personal phone partly claimed: AED 15,000 Personal travel: AED 25,000	Total Business Income: AED 1,120,000 Step 1: Accounting profit (Income – Expenses) AED 1,120,000 − AED 140,000 − AED 40,000 = AED 940,000 Step 2: To get taxable income: Add back nondeductible expenses: AED 940,000 + AED 40,000 Taxable income = AED 980,000 Step 3: Tax liability 0% on first AED 375,000 → AED 0 9% on remaining AED 605,000 → AED 54,450✅ Corporate tax liability: AED 54,450	In this example, we show that: 1. Accounting profit is not necessarily equal to taxable income 2. Salary and Personal income is not included in corporate tax calculation 3. Small nondeductible expenses can significantly change the payable 4. The threshold of AED 375,000 softens the impact for smaller enterprises, but does not remove filing
UAE Mainland Startup (LLC)B2B SaaS productFirst full year of operationsUses accrual accountingNot in a Free Zone, no special exemptions	Revenue Annual recurring revenue (subscriptions) including global client subscribers: AED 1,200,000 Expenses (total: AED 850,000) – Salaries and founder compensation: AED 450,000 – Cloud hosting and software tools: AED 120,000 – Marketing and sales: AED 180,000 – Office, utilities, admin: AED 70,000 – Nondeductible items (e.g. penalties, personal expenses booked): AED 30,000	Step 1: To get the accounting profit Accounting profit: AED 1,200,000 − AED 850,000 = AED 350,000 This is the profit shown in the financial statements. Step 2: Taxable income Add back nondeductible expenses: AED 350,000 + AED 30,000 Taxable income: AED 380,000 Step 3: Apply corporate tax rates 0% on first AED 375,000 → AED 0 9% on remaining AED 5,000 → AED 450 ✔️ Final corporate tax liability AED 450	This example shows clearly that: !. A startup can generate over AED 1 million in revenue and still pay very little corporate tax if margins are thin. 2. You can use Small Business Relief given this falls below <AED 3 million revenue. Be mindful however that this is not beneficial to do if you have losses as they will not be recoverable. 3. Even when tax payable is minimal, the startup must: -> Be registered for Corporate Tax -> File a Corporate Tax return on time
Qualifying Free Zone Company with mixed revenue	– Qualifying Income taxed at 0% – Other income (not qualifying) taxed at 9% – De minimis test is revenue-based: lower of 5% of total revenue or AED 5,000,000 -Assume QFZP conditions are met (substance, audited FS, TP, etc.)	Revenue inputs (used for de minimis test only): -> Qualifying revenue = AED 6,000,000 -> Non-qualifying revenue = AED 200,000 -> Total revenue = AED 6,200,000 De minimis threshold = lower of (5% × 6,200,000 = AED 310,000) or AED 5,000,000 → AED 310,000 ✅ Since AED 200,000 ≤ AED 310,000 => de minimis not breached. Tax computation: Step 1: Start from Accounting Profit Step 2: Apply CT adjustments to get to Taxable Income. Step 3: Allocate taxable income between Qualifying Income (0% tax) and other income that is not Qualifying Income (9%) Note: allocation is based on tagging income streams (not proportional allocation by revenue unless it reflects the actual nature/source) Step 4. Calculate corporate tax payable (Qualifying taxable income × 0%) + (Non-qualifying taxable income × 9%)	In this example, we show that the tax rates apply only after taxable income is calculated. Revenue alone is never taxed.

Important Tax Adjustments and Deductions under Corporate Tax Law

When calculating under UAE corporate tax, businesses must adjust their profit before tax to reflect what is allowed or disallowed under tax law. These tax adjustments ensure that corporate tax is applied to the correct figure rather than what appears in the financial statements.

Key adjustment areas include:

• Certain expenses may be partially or fully deductible when incurred for business purposes; and subject to tax adjustment
• Non-deductible expenses – costs that cannot be deducted for corporate tax purposes, even if they are recorded in the accounts
• Interest deductions or expenses may be deductible up to limits prescribed under the law

Accurate classification of expenses for all business partners is essential to avoid overstating or understating taxable income, which can lead to errors in filing and potential penalties.

For QFZP status, a simple rule of thumb is:

• Qualifying vs non qualifying is mainly about the nature of the income. If it’s within the free zone and meet a certain set of conditions, then it qualifies.
• You must be able to trace income by showing:
  • who the customer is
  • where they are established
  • whether they classify as free zone, mainland or foreign entities

skrooge.ai: expert tools and resources at your disposal

Some businesses use corporate tax calculators as a references, but our main advice with our clients is that calculating corporate tax must always align with financial statements and filing requirements.

We understand that for non tax professionals, calculating corporate tax can be overwhelming and tax in the UAE requires focus and expertise. It helps to prepare ahead of time by using the standard accounting systems, keeping clean records of internal working papers, and treating this as a continuous cycle fixed by adding correct tags early on.

skrooge.ai can help you with expert tools that allows you to tap into qualified tax advisors that gives professional advice on corporate tax purposes. We provide services with transparent fees.

Your СT filing on autopilot, at no extra cost, with 100% of transactions/documents checked:

• Ensure that your books are maintained to CT-ready quality all year round.
• We monitor: SBR thresholds, QFZP conditions & de-minimis limits, related-party & shareholder transactions.
• As the result, we keep filing a seamless and hassle-free process.

To learn more about our services specific to corporate tax, visit our website. You can also check your pricing based on monthly transactions.

Questions? Contact us any time.

This article provides general information on UAE Corporate Tax and does not constitute tax advice under applicable laws. Corporate Tax treatment may vary depending on individual circumstances. Readers should seek professional advice before making any decisions.

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