UAE Corporate Tax Threshold: AED 375,000 at 0% Explained

The UAE taxes the first AED 375,000 of taxable income at 0% and the rest at 9%. See who gets it, how Small Business Relief differs, and what it costs you.

25 October 2026Qawi6 min read

Key takeaways

The UAE corporate tax threshold is AED 375,000 of taxable income: the portion up to that amount is taxed at 0%, and the portion above it is taxed at 9% (as of October 2026).
The AED 375,000 threshold applies to taxable income, which is accounting profit after tax adjustments, not to revenue.
Small Business Relief is a separate relief: a UAE resident company with revenue of AED 3 million or less can elect to be treated as having no taxable income, and the relief now covers tax periods ending on or before 31 December 2029.
A Qualifying Free Zone Person pays 0% on qualifying income, and the 9% rate applies to its income that isn't qualifying income.
Splitting one business into several companies to use the AED 375,000 band more than once is treated as an arrangement to obtain a tax benefit.

Is there a tax-free threshold for UAE corporate tax?

Yes. The first AED 375,000 of a taxable person's taxable income is taxed at 0%, and everything above it is taxed at 9% (Federal Decree-Law No. 47 of 2022, Article 3, and Cabinet Decision No. 116 of 2022, as checked October 2026). It's a band, not an exemption: once you pass it, the 0% band stays in place and only the excess is taxed at 9%.

Taxable income	Rate	Source
Up to AED 375,000	0%	Cabinet Decision No. 116 of 2022, Article 2
Above AED 375,000	9%	Federal Decree-Law No. 47 of 2022, Article 3

Say a mainland trading company has taxable income of AED 1,000,000 (a hypothetical figure). The first AED 375,000 is taxed at 0% and the remaining AED 625,000 at 9%, so the corporate tax is AED 56,250.

AED 375,000: the amount of annual taxable income taxed at 0%; income above it is taxed at 9%. Source: Cabinet Decision No. 116 of 2022 and Federal Decree-Law No. 47 of 2022, checked 25 October 2026.

Does the AED 375,000 threshold apply to revenue or to profit?

It applies to taxable income. Taxable income starts from your accounting profit and is then adjusted under the corporate tax rules, for example for non-deductible expenses and exempt income. A company can have revenue of AED 5 million and still sit inside the 0% band if its adjusted profit is small.

The mistake owners make is comparing their turnover with AED 375,000. Revenue matters for other tests (see Small Business Relief below and the natural person rule), but the 0% band is measured on profit after adjustments.

What is Small Business Relief and how is it different from the threshold?

Small Business Relief lets an eligible UAE resident company elect to be treated as having no taxable income for a tax period, if its revenue stays at or below AED 3 million (Federal Decree-Law No. 47 of 2022, Article 21, and Ministerial Decision No. 73 of 2023). The threshold taxes the first AED 375,000 of profit at 0%; the relief removes the company's taxable income altogether, up to the revenue limit.

On 7 August 2026 the Ministry of Finance announced that Ministerial Decision No. 131 of 2026, issued on 29 July 2026, extends the relief to tax periods ending on or before 31 December 2029. The AED 3 million revenue figure was reported as unchanged.

	AED 375,000 threshold	Small Business Relief
Measured on	Taxable income	Revenue (current and previous tax periods)
Limit	AED 375,000	AED 3 million
What you get	0% on the first AED 375,000	Treated as having no taxable income
Automatic?	Yes	No, the company must elect it
Excluded	Not applicable	Qualifying Free Zone Persons and members of large multinational groups
Available until	No end date	Tax periods ending on or before 31 December 2029

Relief has a cost. Per PwC's summary of Ministerial Decision No. 73 of 2023, tax losses carried forward and disallowed net interest can be used only in periods where the relief isn't elected, so a loss-making start-up may be better off not electing. If you'd rather not track these dates by hand, the free UAE compliance calendar lists them for your company.

Do free zone companies get the AED 375,000 threshold?

It depends on whether the company is a Qualifying Free Zone Person. A Qualifying Free Zone Person pays 0% on qualifying income, and its other income is taxed at 9% (Federal Decree-Law No. 47 of 2022, Article 3(2)). A free zone company that doesn't qualify is taxed like any other taxable person.

To qualify, the company must maintain adequate substance in the UAE, earn qualifying income as defined by Cabinet decision, not elect to be taxed under the normal regime, and meet the law's other conditions (Article 18). Free zones differ in what they license, so check whether your activity produces qualifying income before assuming a 0% result. Small Business Relief is not available to a Qualifying Free Zone Person.

Do individuals and freelancers get the threshold?

Individuals pay corporate tax only if turnover from a business or business activity exceeds AED 1,000,000 within a calendar year (Cabinet Decision No. 49 of 2023, Article 2, in force from 1 June 2023). Wages, personal investment income and real estate investment income don't count towards that figure. Below AED 1,000,000 of qualifying turnover, a natural person isn't required to register for corporate tax.

Above it, the same 0% and 9% bands apply to the individual's taxable income.

What happens if you split a business to use the threshold twice?

The anti-fragmentation rule treats it as an arrangement to obtain a tax benefit. Cabinet Decision No. 116 of 2022, Article 2(2), says that where persons have artificially separated their business or business activity so that more than AED 375,000 of income gets the 0% rate, the arrangement falls under Article 50 of the Corporate Tax Law. Small Business Relief has an equivalent rule: if a business is split to stay under AED 3 million, the FTA can adjust the tax liability.

Running two genuinely separate businesses with different owners and commercial reasons is a different case. Get advice on your facts before restructuring.

What most guides don't tell you

A 0% result still has compliance attached. The threshold changes how much tax you pay, not whether you are a taxable person. The FTA's own notice set 30 September 2026 as the deadline for returns for the financial year ended 31 December 2025, so a company with nothing to pay should still confirm its registration and filing obligations with the FTA.

The threshold is not shared across a tax group. A Tax Group is treated as a single taxable person (Article 40), represented by its parent, so the group gets one AED 375,000 band, not one per member. Per PwC, a company in a Tax Group that qualifies for Small Business Relief on its own loses that benefit, because its revenue is aggregated with the group.

Large multinational groups face a different floor. Under Cabinet Decision No. 142 of 2024, UAE entities of in-scope groups (consolidated revenue of EUR 750 million or more) are subject to a 15% domestic minimum top-up tax for fiscal years starting on or after 1 January 2025, per EY's summary. For those groups, the AED 375,000 band doesn't settle the final tax cost.

The relief and the band can point in different directions. A company with AED 2 million of revenue and AED 300,000 of profit pays 0% either way, but electing Small Business Relief can forfeit loss carry-forwards that the normal regime would preserve. Run both calculations before you elect.

Frequently asked questions

What is the UAE corporate tax rate?

The UAE corporate tax rate is 0% on the first AED 375,000 of taxable income and 9% on the portion above it (Federal Decree-Law No. 47 of 2022, Article 3). Qualifying Free Zone Persons pay 0% on qualifying income and 9% on their other income.

What is Small Business Relief and do I qualify?

Small Business Relief lets a UAE resident company elect to be treated as having no taxable income if its revenue is AED 3 million or less. Qualifying Free Zone Persons and members of large multinational groups are excluded, and the company has to make the election itself.

Can I claim Small Business Relief if my revenue is just over the limit?

No. Ministerial Decision No. 73 of 2023 tests revenue against AED 3 million for the current and each previous tax period, so revenue over the limit removes the relief for that period. You would then pay 9% on taxable income above AED 375,000 and lose the simplified treatment.

Is Small Business Relief still available after 2026?

Yes. Ministerial Decision No. 131 of 2026, issued on 29 July 2026, extends Small Business Relief to tax periods ending on or before 31 December 2029.

Do free zone companies pay corporate tax in the UAE?

Yes, unless they qualify for a 0% rate. A Qualifying Free Zone Person pays 0% on qualifying income and 9% on other income, while a free zone company that isn't a Qualifying Free Zone Person is taxed like a mainland company.

Which deadlines apply to your company?

The threshold tells you what you owe; the dates tell you when. Qawi's free UAE compliance calendar is a free calendar of your company's UAE tax and compliance deadlines, personalised from a few questions, as a PDF and calendar file.

About Qawi · Qawi is a corporate services firm licensed in the Sharjah Media City (SHAMS) free zone, handling company formation, visas and PRO, bookkeeping, VAT and corporate tax for UAE businesses. Guides are researched from FTA, Ministry of Finance and free zone sources. Qawi on LinkedIn

Sources

Last checked: 25 October 2026

This is general information, not tax or legal advice for your specific situation.