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UAE Corporate Tax 9 Percent Explained: Who Pays Who Is Exempt

UAE 9 percent corporate tax applies to profits above AED 375,000. Free zone qualifying income still gets 0 percent. Here is who pays in 2026.

·7 min read·By the Tovi UAE Team

Quick answer

UAE corporate tax applies at 9 percent on taxable profits exceeding AED 375,000 for most businesses. Free zone companies can keep 0 percent on qualifying income if they meet all substance and activity requirements set by the Federal Tax Authority. Qualifying income includes transactions with mainland entities, individuals, and non-qualifying free zone persons. Non-qualifying income such as excluded activities receives 9 percent wherever earned. Individuals and small businesses below the threshold pay nothing.

Who pays the 9 percent rate

Any juridical person resident in the UAE for tax purposes pays 9 percent on profits above AED 375,000. This includes mainland LLCs, branches of foreign companies, and free zone entities on non-qualifying income. The rate applies from 1 June 2023 and remains unchanged through 2026.

Businesses inside free zones

Free zone entities must track every dirham of income separately. Only qualifying income earns 0 percent. Non-qualifying income such as domestic mainland sales, excluded activities, and transactions with non-qualifying free zone persons draws 9 percent. Entities failing to meet the qualifying free zone person test lose 0 percent status entirely.

Businesses outside free zones

Mainland companies, professional service firms, and commercial establishments pay 9 percent across all profits once they exceed the AED 375,000 threshold. No 0 percent ring-fence exists for these entities.

Foreign branch profits

Foreign-owned branches operating in the UAE draw 9 percent on local profits. The 0 percent free zone benefit does not extend to foreign-owned free zone branches unless they satisfy every qualifying free zone person requirement.

Who remains exempt

Several categories of entities avoid corporate tax entirely. Government entities, extractive industries, and natural resource companies fall under special regimes. Individuals carrying on business as sole proprietors remain exempt unless they convert to a juridical person.

Government entities

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