UAE Corporate Tax Guide 2026: 9% Rate, QFZP 0%, Small Business Relief and India DTAA

May 21, 2026
Comply Globally Team

Is UAE Still Tax-Free? The Short Answer Is No

UAE corporate tax applies to financial years starting on or after 1 June 2023: 0% on taxable income up to AED 375,000 and 9% above it, with the return filed on EmaraTax with the Federal Tax Authority within 9 months of your year end. Qualifying free zone companies can pay 0% on qualifying income, and Small Business Relief now runs to 31 December 2029.

Key facts

Rates: 0% on taxable income up to AED 375,000 and 9% above. A Qualifying Free Zone Person pays 0% on qualifying income and 9% on the rest. Groups with global revenue of EUR 750 million or more pay a 15% domestic minimum top-up tax for financial years from 1 January 2025.
Small Business Relief (revenue up to AED 3 million) covers tax periods ending on or before 31 December 2029 under Ministerial Decision No. 131 of 2026. It is not available to a QFZP or to large multinational group members.
Every company registers on EmaraTax with the Federal Tax Authority, and files and pays within 9 months of its financial year end.
VAT is 5%, with mandatory registration above AED 375,000 and voluntary registration from AED 187,500.
The UAE charges no withholding tax on dividends, interest or royalties paid abroad. On income from India, the DTAA caps dividends at 10%, interest at 5% or 12.5% and royalties at 10%, claimed with a UAE Tax Residency Certificate.
For the India side (ODI, APR, FLA) see our FEMA and ODI guide, and for setup our UAE company formation page.

Effective from 1 June 2023, the UAE introduced a 9% Corporate Income Tax (CIT) under Federal Decree-Law No. 47 of 2022. Any Indian entrepreneur, startup founder, consultant, or multinational company using the UAE as a business hub must understand these changes carefully.

However, the UAE still remains one of the world’s most tax-efficient jurisdictions because:

0% tax applies on taxable income up to AED 375,000
Qualifying Free Zone Persons (QFZP) can still enjoy 0% tax on qualifying income
Small Business Relief is available for eligible businesses
The standard corporate tax rate is only 9%

The UAE is no longer a “zero-tax” destination but it is still one of the most attractive business jurisdictions globally.

The UAE introduced 9% Corporate Tax from 1 June 2023. Free zone companies can still benefit from 0% tax only if they satisfy strict QFZP conditions.

UAE Corporate Tax Full Structure

UAE Corporate Tax Rates

Taxable Income / Status	Tax Rate	Eligibility
Taxable income up to AED 375,000	0%	All taxable persons
Taxable income above AED 375,000	9%	Mainland and non-QFZP entities
Qualifying Free Zone Person (QFZP)	0% on qualifying income	Eligible free zone companies
Non-qualifying income of QFZP	9%	Income failing qualifying tests
Small Business Relief	Taxable income treated as nil (elected)	Revenue ≤ AED 3 million
Large multinational groups	15% top-up	Global revenue ≥ €750M

When Does UAE Corporate Tax Apply?

Corporate Tax applies to all “taxable persons” including:

UAE mainland companies
UAE free zone companies
Foreign companies managed from the UAE
Individuals conducting business activities above AED 1 million annual revenue
Non-residents with a Permanent Establishment (PE) in the UAE

Excluded Income

The following income is generally excluded from UAE Corporate Tax:

Salary income
Personal investment income
Dividends from personal investments
Capital gains from personal investments
Real estate rental income earned personally

Financial Year & Filing Deadlines

Parameter	Rule
Standard Financial Year	1 January – 31 December
First Tax Period	FY beginning on or after 1 June 2023
Corporate Tax Return Deadline	9 months after FY end
Tax Payment Deadline	Same as return filing
Late Filing Penalty	AED 500/month initially

Small Business Relief AED 3 Million Threshold

Under Ministerial Decision No. 73 of 2023, eligible businesses with revenue below AED 3 million can elect Small Business Relief.

This means:

Taxable income is treated as NIL
Effective corporate tax rate becomes 0%
Relief is available for tax periods ending on or before 31 December 2029, after Ministerial Decision No. 131 of 2026 extended it

Important Limitation

Small Business Relief is not available for:

Members of large multinational groups (consolidated revenue of EUR 750 million or more)
Qualifying Free Zone Persons
Companies forming part of a UAE tax group

Indian entrepreneurs operating multiple UAE entities should carefully evaluate group-level eligibility.

QFZP 0% Tax for Free Zone Companies

What Is a Qualifying Free Zone Person (QFZP)?

A Qualifying Free Zone Person is a UAE free zone entity that satisfies all required conditions under UAE Corporate Tax law.

A QFZP can enjoy:

0% Corporate Tax on qualifying income
9% tax on non-qualifying income

Simply registering a company in a UAE free zone does not automatically guarantee 0% tax treatment.

The QFZP Conditions

Condition	Requirement
Free Zone Presence	Must be incorporated in a recognized UAE free zone
Adequate Substance	Employees, office, expenditure, and activities required
Qualifying Income	Must earn qualifying income
De Minimis Test	Non-qualifying income must stay below threshold
Audited Financials	Mandatory audited accounts. You must also follow arm’s length transfer pricing and not elect for the standard rates

What Counts as Qualifying Income?

Qualifying income generally includes:

Transactions with other free zone entities
Manufacturing activities
Shareholding and securities income
Treasury and financing services to related parties
Logistics services
Aircraft leasing and financing
Fund and investment management activities

Non-Qualifying Income

The following commonly becomes taxable at 9%:

Services provided to UAE mainland companies
UAE real estate income outside permitted zones
Intellectual property income failing nexus rules

Important IP Rule

Income from intellectual property only qualifies if the IP is genuinely developed and maintained in the UAE.

Indian businesses routing India-owned IP through UAE structures may face significant tax exposure.

Consequences of Losing QFZP Status

Consequence	Impact
Standard Rates on All Income	0% up to AED 375,000 and 9% above, on all taxable income
Next Four Tax Periods	Standard rates continue; you cannot requalify until they end
Back-Tax Risk	FTA may reassess previous years
Penalties	Financial penalties may apply

UAE VAT 5% Value Added Tax

UAE VAT has applied since 1 January 2018 at a standard rate of 5%.

VAT is separate from Corporate Tax.

UAE VAT Overview

VAT Parameter	Details
Standard VAT Rate	5%
Mandatory Registration Threshold	AED 375,000
Voluntary Registration Threshold	AED 187,500
VAT Return Frequency	Quarterly or monthly
VAT Filing Deadline	28 days after tax period

Zero-Rated Supplies

Examples include:

Exports outside UAE
International transportation
Selected educational services

VAT-Exempt Supplies

Examples include:

Residential property
Local passenger transport
Certain financial services
Bare land transactions

Important Note for Free Zone Companies

Most UAE free zones are NOT automatically exempt from VAT.

Only specific designated zones receive special VAT treatment.

India UAE DTAA

Overview of India–UAE DTAA

India and the UAE signed a Double Taxation Avoidance Agreement (DTAA) to avoid double taxation on cross-border income.

This treaty is extremely important for Indian founders operating UAE entities.

DTAA Tax Rates

Income Type	DTAA Rate
Dividends	10%
Interest	5% (loans from a bank or financial institution) / 12.5%
Royalties & FTS	Royalties 10%. No separate article for technical services, which are usually taxed as business profits
Capital Gains	Depends on the asset: check the treaty article before you sell
Business Profits	PE-based taxation

Foreign Tax Credit (FTC) Benefit

Now that UAE imposes a genuine 9% Corporate Tax, Indian companies may claim Foreign Tax Credit under Indian tax law.

This significantly improves UAE structure legitimacy compared to pure zero-tax jurisdictions.

India–UAE CEPA Agreement

India and the UAE signed the Comprehensive Economic Partnership Agreement (CEPA) in 2022.

Major benefits include:

Reduced tariffs
Better market access
Improved services trade
Investment protection
Easier export opportunities

Permanent Establishment (PE) Risks

Indian companies operating UAE entities must monitor PE exposure carefully.

Common risks include:

UAE company effectively managed from India
Employees in India concluding contracts for UAE entity
Improper transfer pricing structures

If triggered, India may tax UAE profits.

UAE Transfer Pricing Rules

The UAE introduced OECD-style Transfer Pricing regulations.

Related-party transactions must follow arm’s-length principles.

Key Transfer Pricing Requirements

Requirement	UAE Rule
Related Party Disclosure	Mandatory
TP Documentation	Required above thresholds
Accepted Methods	OECD methods
Country-by-Country Reporting	Large MNE groups only

Conclusion

The UAE has evolved from a pure zero-tax jurisdiction into a sophisticated low-tax global business hub.

While 9% Corporate Tax now applies, the UAE still offers major advantages:

0% tax up to AED 375,000
QFZP 0% benefits for eligible free zone entities
Strong India-UAE DTAA protection
Low VAT rate
Global business connectivity
Strong banking and infrastructure ecosystem

For Indian entrepreneurs, proper structuring and compliance are now critical.

Businesses must actively manage:

Corporate Tax filings
VAT compliance
QFZP qualification
Transfer Pricing documentation

When structured correctly, the UAE remains a low-tax, practical base for international expansion.

UAE corporate tax: frequently asked questions

What is the corporate tax rate in the UAE?

UAE corporate tax is 0% on taxable income up to AED 375,000 and 9% above it. A Qualifying Free Zone Person pays 0% on qualifying income and 9% on non-qualifying income. Multinational groups with global revenue of EUR 750 million or more also pay a 15% domestic minimum top-up tax for financial years from 1 January 2025.

Who has to pay UAE corporate tax?

Mainland and free zone companies, foreign companies effectively managed from the UAE, non-residents with a permanent establishment in the UAE, and individuals whose business revenue exceeds AED 1 million a year. Salary, personal investment income and personal rental income are outside the tax. Every taxable company must register with the FTA, even if it pays 0%.

When are tax returns due in the UAE?

The corporate tax return and payment are due within 9 months of the end of your financial year, so 30 September for a January to December year. VAT returns are due 28 days after each quarter or month. A late corporate tax return starts at AED 500 a month, and extensions are not automatic.

How long is Small Business Relief available?

Ministerial Decision No. 131 of 2026 extended Small Business Relief to tax periods ending on or before 31 December 2029. A resident business with revenue up to AED 3 million can elect it and be treated as having no taxable income. It is not open to a QFZP or to members of large multinational groups.

Does India have a DTAA with the UAE?

Yes. On income paid from India to a UAE resident, the treaty caps tax on dividends at 10%, interest at 5% on loans from a bank or financial institution and 12.5% otherwise, and royalties at 10%. It has no separate article for technical services. The UAE company claims these rates with a UAE Tax Residency Certificate.

How are dividends from the UAE taxed in India?

The UAE withholds no tax on dividends, so a UAE company can pay you the full amount. If you are tax resident in India, the dividend is taxable in India at your applicable rate. Report it in Schedule FSI and the shareholding in Schedule FA. As no UAE tax is withheld, there is usually no foreign tax credit to claim on it.

Is there withholding tax in the UAE?

No. The UAE charges 0% withholding tax on dividends, interest and royalties paid to non-residents. That is why treaty rates matter mainly for income flowing from India into the UAE company, where Indian withholding applies at the DTAA rates when the UAE company holds a Tax Residency Certificate.

More UAE guides

Setting up in UAE? Our UAE company formation page explains the process and the services we offer. Other guides in this series:

All UAE articles: UAE guides.