The UAE introduced Corporate Tax at a standard rate of 9% starting June 1, 2023 — a move aimed at aligning with global tax standards while still offering a competitive edge. But many businesses are still unsure how corporate tax is calculated in the UAE.

In this blog, we’ll walk you through the full process of UAE corporate tax calculation, from understanding thresholds to applying deductions, and even showing an example calculation. Whether you’re a mainland company or a free zone business, this guide will help you confidently assess your corporate tax liability.

🧮 What Is Corporate Tax in the UAE?

Corporate Tax in the UAE is a direct tax on the net profit of businesses. As of 2025:

• 0% tax on income up to AED 375,000

• 9% tax on income above AED 375,000

• 15% tax for certain Multinational Enterprises (MNEs)

The tax applies to mainland companies, while Qualifying Free Zone Persons (QFZPs) may continue enjoying a 0% rate on qualifying income, subject to conditions.

Who Needs to Pay Corporate Tax in UAE?

📊 Step-by-Step: How to Calculate Corporate Tax

1. Determine Net Profit

Refer to your IFRS-compliant financial statements to identify your net profit for the year.

2. Adjust for Deductions and Exempt Income

Subtract any deductible expenses (like salaries, rent, utilities) and exclude exempt income (like dividends or qualifying free zone income).

3. Apply the Tax Threshold

• If net profit ≤ AED 375,000 ➜ 0% tax

• If net profit > AED 375,000 ➜ Tax is calculated on the amount exceeding that

✅ Example:

If your net profit = AED 600,000
Taxable amount = AED 600,000 – 375,000 = AED 225,000
Corporate Tax = 9% of 225,000 = AED 20,250

💼 Corporate Tax Adjustments You Must Know

📌 Deductible Business Expenses:

• Salaries and wages

• Rent, electricity, IT infrastructure

• Depreciation and amortization

• Marketing and advertising

⚠️ Non-Deductible or Limited Deductions:

• Only 50% of entertainment expenses

• Interest expenses limited to 30% of EBITDA

• Fines and penalties are not deductible

• Personal expenses are excluded

📌 Exempt Incomes:

• Dividends and capital gains from UAE/foreign subsidiaries

• Income from natural resource extraction

• Qualifying Free Zone income

• Intra-group transactions (if conditions met)

🔁 What Is Tax Loss Relief?

Tax loss relief allows businesses to carry forward losses to offset against future profits, reducing future tax liability.

Key Rules:

• Losses can offset up to 75% of taxable income

• Unused losses can be carried forward indefinitely

• Must be applied in the next eligible period

📌 Example:
If your business has a loss of AED 100,000 in 2024, and a profit of AED 400,000 in 2025:
Taxable amount after relief = 400,000 – (75% of 400,000) = 100,000
Corporate Tax = 9% of 100,000 = AED 9,000

🧾 Small Business Relief

To support startups and micro-businesses, the UAE offers Small Business Relief.

✅ Eligibility:

• Revenue is ≤ AED 3 million

• Applies for tax periods from June 1, 2023 to Dec 31, 2026

If eligible, you’re considered as having no taxable income — thus paying 0% even if you made a profit over AED 375,000.

📌 Note: Once you exceed AED 3 million in any year, the relief is no longer applicable in subsequent periods.

🌐 Corporate Tax for Free Zone Companies

Free zone companies may enjoy 0% corporate tax on qualifying income if they meet QFZP conditions, such as:

• Maintaining adequate economic substance

• Not opting to be taxed as a mainland company

• Earning qualifying income (e.g., export services, trading with overseas clients)

However, income earned from mainland clients may become fully taxable at 9%.

❓ FAQs

❓ How is corporate tax calculated in UAE?

UAE Corporate Tax is calculated at 9% of taxable income exceeding AED 375,000. Income below this threshold is taxed at 0%.

❓ Who is exempt from corporate tax in UAE?

Entities in free zones earning qualifying income, businesses with revenue under AED 3 million (until 2026), and income types like dividends and capital gains may be exempt.

❓ Can a business carry forward losses?

Yes, tax losses can be carried forward indefinitely but can only offset up to 75% of taxable income in a future year.

Understanding how corporate tax is calculated in the UAE is critical for staying compliant and optimizing your business finances. From adjusting your income to applying reliefs and exemptions, every step can impact your final tax liability.

Need help calculating your company’s corporate tax or optimizing your deductions?
Let the experts at TaxAccountant.ae handle it for you!

📞 Book a free consultation now and ensure 100% compliance with the UAE Corporate Tax Law.
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