UAE Corporate Tax: a practical guide for SMEs

UAE Corporate Tax applies to financial years starting on or after 1 June 2023, under Federal Decree-⁠Law No. 47 of 2022. For most small and medium businesses the rules are manageable, but the obligations start well before any tax is due. This guide covers the points we are asked about most often.

Who has to register

Every taxable person must register with the Federal Tax Authority (FTA) through EmaraTax. That includes mainland companies, free zone companies, and businesses that expect to pay no tax at all. Individuals doing business in the UAE must also register once their business turnover exceeds AED 1 million in a calendar year.

Late registration carries a fixed administrative penalty, so check your registration deadline even if your profit is small.

How the rates work

• 0% on taxable income up to AED 375,000.
• 9% on taxable income above AED 375,000.
• Qualifying Free Zone Persons can pay 0% on qualifying income, provided they meet all the conditions, including adequate substance in the UAE and audited financial statements. Non-⁠qualifying income is taxed at 9%.

Small Business Relief

A resident person whose revenue is AED 3 million or less in the tax period, and in every previous tax period, can elect to be treated as having no taxable income. Ministerial Decision No. 131 of 2026 extended the relief to tax periods ending on or before 31 December 2029. The AED 3 million threshold and the other conditions did not change.

The relief is an election, not an exemption from the system: you must still register, keep records and file a return. It is not available to Qualifying Free Zone Persons or members of large multinational groups.

Filing and payment

The Corporate Tax return must be filed, and any tax due paid, within nine months of the end of the tax period. For a business with a calendar-⁠year tax period, that means 30 September of the following year.

Records and financial statements

• Prepare financial statements under IFRS. Businesses with revenue of AED 50 million or less may use IFRS for SMEs.
• Audited financial statements are required when revenue exceeds AED 50 million, and for all Qualifying Free Zone Persons.
• Keep your records and supporting documents for seven years after the end of the tax period.

Common adjustments to accounting profit

Taxable income starts from your accounting profit, then adjusts it. Typical adjustments include:

• 50% of client entertainment costs, such as meals, accommodation and events for clients and business partners, is not deductible.
• Net interest expenditure is deductible up to the higher of AED 12 million or 30% of adjusted EBITDA (earnings before interest, tax, depreciation and amortisation, worked out from taxable income). Any amount disallowed can be carried forward and used over the next 10 tax periods, in the order it was incurred. Most SMEs have net interest well below AED 12 million, so the limit rarely affects them. Banks, insurance providers and individuals doing business are outside this rule.
• Transactions with related parties must meet the arm’s-⁠length standard, and payments to connected persons, such as owners and directors, are deductible only to the extent they reflect market value.

A short checklist for SMEs

1. Confirm your registration status and tax period on EmaraTax.
2. Test Small Business Relief eligibility for each tax period up to 2029.
3. Keep your books up to date every month so your financial statements can be prepared under IFRS.
4. List every related-⁠party and owner transaction, and document its pricing.
5. Diarise the filing deadline: nine months after the end of your tax period.