Corporate Tax in the UAE in 2026: A Detailed Analysis for Business Owners and Advisors

Since 1 June 2023, the United Arab Emirates has operated under Federal Decree-Law No. 47 of 2022 on the Taxation of Corporations and Businesses. By 2026, this regime has become fully embedded in banking, investment, and compliance practice.

It is important to understand: corporate tax in the UAE is a fully developed tax framework with mandatory reporting, transfer pricing rules, and enforcement mechanisms. It is no longer a symbolic rate — it is a structural element of the business environment.

1. Corporate Tax Rates in 2026

In accordance with Articles 13–15 of Federal Decree-Law No. 47 of 2022:

• 0% applies to taxable income up to AED 375,000;

• 9% applies to taxable income exceeding AED 375,000;

• 15% applies to large multinational groups subject to the OECD Pillar Two global minimum tax rules (generally where consolidated global revenue exceeds EUR 750 million).

Corporate tax is calculated on taxable profit, not turnover.

2. Who Is Subject to Corporate Tax

Corporate tax applies to:

• Mainland companies;

• Free Zone companies;

• branches of foreign companies;

• certain business activities conducted by individuals, subject to thresholds.

Even where the applicable rate is 0%, companies are required to:

• register with the Federal Tax Authority (FTA);

• maintain proper accounting records;

• file an annual corporate tax return.

A zero rate does not mean exemption from compliance.

3. Free Zone and Qualifying Free Zone Person (QFZP)

A Free Zone company may retain the 0% rate if it meets the criteria of a Qualifying Free Zone Person (QFZP).

The main requirements, as provided in Articles 18–23 of the Corporate Tax Law and the relevant Cabinet Decision, include:

1. Earning Qualifying Income;

2. Maintaining adequate economic substance;

3. Complying with transfer pricing requirements;

4. Limiting non-qualifying income within prescribed thresholds.

If the conditions are breached, the 9% rate applies to the entire taxable income.

Simply holding a Free Zone license does not guarantee a zero rate.

4. Taxable Income: What Is Included

Taxable income is derived from accounting net profit with adjustments required under the law.

Included in the taxable base:

• operating income;

• financial income;

• investment income;

• certain intellectual property-related transactions.

Participation exemption may apply to certain dividends and capital gains, subject to holding and ownership conditions.

Proper accounting and documentation are critical to correctly determine taxable income.

5. Transfer Pricing

The UAE applies the arm’s length principle to related-party transactions.

Companies must:

• disclose related-party transactions;

• ensure pricing reflects market conditions;

• maintain transfer pricing documentation;

• provide documentation upon FTA request.

Failure to comply may result in tax base adjustments and penalties.

This is particularly relevant for multinational structures and cross-border operations.

6. Reporting and Filing Deadlines

Companies must:

1. register with the Federal Tax Authority;

2. maintain accounting records;

3. retain documentation for at least 5–7 years;

4. file an annual corporate tax return within 9 months after the end of the financial year.

Even companies with zero taxable income must file a return.

7. Penalties and Sanctions

Corporate tax penalties are governed by the Corporate Tax Law and related administrative decisions of the Federal Tax Authority.

1) Late Registration or Filing

Administrative penalties may start from AED 10,000 for failure to register or late filing. Repeated violations may result in higher penalties.

2) Errors and Understatement of Taxable Income

The FTA may reassess tax and impose penalties calculated as a percentage of the unpaid tax. Significant misstatements may result in substantial financial exposure.

3) Transfer Pricing and Substance Violations

Failure to comply with transfer pricing or economic substance requirements may lead to loss of QFZP status and reassessment at 9%.

Interest may also accrue on unpaid amounts.

Tax authorities may conduct audits and require explanations of the economic rationale behind transactions.

8. Small Business Relief

The UAE introduced Small Business Relief (SBR) for businesses with annual revenue below approximately AED 3 million. The regime is currently available until the end of 2026.

However:

• registration remains mandatory;

• accounting must be maintained;

• filing obligations remain in force.

Incorrect application of SBR may lead to reassessment and penalties.

9. Common Mistakes

Based on advisory practice, the most frequent errors include:

• assuming Free Zone automatically means 0% tax;

• failing to register or file returns on time;

• ignoring transfer pricing requirements;

• mixing personal and corporate expenses;

• failing to document economic substance.

Such errors often lead to penalties and increased scrutiny from the tax authority.

10. Practical Recommendations

✔ Develop a tax strategy before commencing operations.

✔ Assess QFZP eligibility annually.

✔ Implement IFRS-compliant accounting from day one.

✔ Prepare transfer pricing documentation where required.

✔ Maintain separate and properly documented expense tracking.

Conclusion

Corporate tax in the UAE in 2026 is a structured, internationally aligned tax regime built on transparency, economic substance, and compliance.

The 9% rate remains competitive by international standards. However, improper application or failure to comply can result in significant penalties and financial exposure.

Strategic tax planning integrated into the business model from inception is now a core element of financial stability and investor confidence.

Legislative References

Federal Decree-Law No. 47 of 2022 on the Taxation of Corporations and Businesses link

Federal Tax Authority – Corporate Tax Legislation and Guidance link

Guide on Free Zone Persons – Qualifying Free Zone Person Requirements link

Additional Official Reference — Corporate Tax Filing & Compliance link