The UAE corporate-tax regime in plain terms
UAE federal corporate tax came into effect on 1 June 2023. Every UAE business — Mainland, Free Zone, and many offshore — must register with the Federal Tax Authority (FTA), maintain compliant accounting records, and file an annual return. The headline rate is 9% on taxable profits above AED 375,000; below that threshold, the rate is 0%.
For Free Zone companies, there is a separate 0% rate on "qualifying income" if the company maintains "Qualifying Free Zone Person" (QFZP) status. Maintaining QFZP requires substance, audit and qualifying-income tests — get those wrong, and the entire profit is taxed at 9%.
Why this is harder than it looks
Mandatory registrationEvery UAE business — even loss-making — must register with the FTA. Failure is a fixed penalty.
IFRS-compliant accountsTax computation requires IFRS-compliant statements. Cash-basis bookkeeping isn’t enough.
QFZP rulesFree Zone 0% rate isn’t automatic — substance, transfer-pricing and qualifying-income tests apply.
Transfer pricingRelated-party transactions need arm’s-length pricing and documentation (TP master/local files for larger groups).
Filing deadlinesAnnual return due 9 months after financial year-end. Late filing: AED 500–1,000+ in penalties.
PenaltiesRange from AED 1,000 (registration) to AED 50,000 (incorrect filing). Compliance is cheaper than fines.
What we do
- FTA registration (mandatory) and tax-period setup
- IFRS-compliant accounting setup (or review of existing books)
- QFZP eligibility analysis for Free Zone companies — including qualifying-income classification
- Transfer-pricing analysis for related-party transactions
- Annual taxable-income computation and tax-return preparation
- Submission to the FTA portal and acknowledgement record
- Liaison with FTA on queries, audits and clarifications
- Year-round advisory: deductibility questions, group reorganisation, M&A tax structuring
Free Zone QFZP analysis — the highest-value piece
Free Zone clients often pay us to analyse QFZP status before their first filing. The analysis answers four questions:
- Does the company maintain "adequate substance" — staff, premises, expenditure — in the Free Zone?
- Does it derive "qualifying income" (B2B with other Free Zones, foreign parties, or qualifying activities)?
- Does it derive "non-qualifying income" above the de minimis threshold (5% of total revenue or AED 5M)?
- Are related-party transactions priced at arm’s length, with documentation?
Get all four right and the qualifying portion of profit pays 0%. Get any one wrong and the whole profit pays 9%.
Penalties for non-compliance
- Failure to register: AED 10,000
- Late return filing: AED 500/month for first 12 months, then AED 1,000/month
- Failure to maintain records: AED 10,000–50,000
- Incorrect or fraudulent return: 5–500% of tax due, plus criminal exposure
