The United Arab Emirates (UAE) introduced a unified federal corporate tax regime effective from 1 June 2023 — a major shift from its earlier reputation as a tax-free business haven.
Under this system, businesses are taxed based on their net (taxable) profits, not revenue.
Current Corporate Tax Rates (2025)
- 0% corporate tax on taxable income up to AED 375,000 — this benefits small businesses, startups, and modest-profit companies.
- 9% standard tax rate on taxable income above AED 375,000.
- For large multinational enterprises (MNEs) that meet certain global-revenue criteria, a minimum “top-up” tax of 15% may apply — in line with international (OECD) tax-transparency rules. his tiered structure balances support for smaller businesses with fair taxation of more profitable or large-scale operations.
Who Must Pay Corporate Tax
Corporate tax in the UAE applies broadly to:
- Companies and business entities — both those incorporated within the UAE and foreign businesses that are effectively managed in the UAE.
- Free-zone companies, though many enjoy favorable treatment: if they qualify under the law (meet substance requirements, limit non-qualifying income, etc.), their “qualifying income” may remain taxed at 0%.
- Small and medium-sized enterprises (SMEs) with lower profits — thanks to the 0% threshold, many pay no corporate tax at all.
It’s important to note that corporate tax is levied on net profit (after allowable deductions), not on gross revenue.
Why the UAE’s Tax Regime Is Attractive
- The 0% rate for profits up to AED 375,000 offers great relief for small businesses and startups, reducing financial pressure in early growth phases.
- The 9% standard rate is modest compared to many global jurisdictions — appealing for medium to large businesses.
- Free-zone incentives enable many companies to operate with 0% tax on qualifying income, preserving the UAE’s historic appeal as a business hub.
- The 15% minimum tax for multinational enterprises ensures compliance with global tax standards, yet still keeps effective taxation competitive.
What Businesses Should Check / Do
- Carefully calculate taxable profits (net income after expenses), not just gross revenue.
- If operating in a free zone, verify whether your income qualifies for the 0% exemption and ensure you meet all substance & compliance criteria.
- If your business is part of a multinational, check whether global-revenue thresholds trigger the 15% top-up tax.
- Ensure timely registration, record-keeping, and annual tax-return filing with the UAE tax authorities.
Conclusion
The UAE’s corporate tax framework — 0% up to AED 375,000, 9% beyond, and a 15% minimum for large multinationals — strikes a balance between maintaining a business-friendly environment and aligning with global tax norms. For many small businesses, startups, and free-zone companies the regime remains highly favorable; larger firms still enjoy competitive rates relative to many other countries.
If you like — I can also prepare a quick comparison of UAE corporate tax vs Pakistan corporate tax (since you’re in Lahore), to show relative tax burden. Want me to build that for you now?
