UAE Corporate Tax 2026 Rules for SMEs

Who Pays Corporate Tax in 2026

Any business with taxable income over AED 375,000 pays 9 percent corporate tax. SMEs below this threshold still register but pay nothing. Free-zone companies that only serve clients outside the UAE keep the 0 percent rate on qualifying income. Mixed-zone income triggers the 9 percent rate on the non-qualifying portion.

Small Business Relief Details

The relief applies automatically to taxable persons whose revenue stays under AED 3 million in a tax period. You must still file a return and keep records for seven years. If revenue crosses the limit, full tax rules start from the next period. Revenue includes all UAE and foreign source income connected to the business.

Free Zone Benefits in 2026

Qualifying Free Zone Persons pay 0 percent on income from qualifying activities with non-UAE customers. Activities such as trading, manufacturing, and certain services remain eligible. Income from UAE mainland customers or non-qualifying activities faces 9 percent. The free-zone company must keep separate accounts and submit an annual confirmation to the Federal Tax Authority.

Registration and Filing Process

Register through the EmaraTax portal within three months of starting taxable activity. Obtain a Tax Registration Number even if relief applies. File the corporate tax return within nine months after the financial year ends. Payments are due at the same time. Late filing attracts a AED 10,000 penalty for the first offence and AED 20,000 for repeats.

Record-Keeping and Compliance

Keep invoices, bank statements, and contracts for seven years. Maintain transfer-pricing documentation if related-party transactions exceed AED 200 million in a year. Use an approved accounting software that meets FTA data standards. Annual audits are not required for relief-eligible SMEs, but larger free-zone entities must appoint an auditor.

Common Mistakes to Avoid

Many owners forget to separate qualifying and non-qualifying income in free zones. Others miss the nine-month filing deadline after their first financial year. Confirm your revenue threshold each period and update the FTA within 20 working days of any change in ownership or activity.

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