United Arab Emirates Tax Regime

The United Arab Emirates introduced a federal corporate tax for financial years beginning on or after 1 June 2023 — a landmark change for a jurisdiction long associated with the absence of direct taxation. The headline rate is 9%, with a 0% band on the first AED 375,000 of taxable income and a 0% rate on the qualifying income of Free Zone businesses that maintain adequate substance. There remains no personal income tax of any kind, no withholding tax, and no capital-gains tax outside the business sphere; consumption is taxed through a 5% VAT. A 15% domestic minimum top-up tax applies to large multinational groups from 2025.

The new corporate tax is administered federally by the Federal Tax Authority and applies across all seven Emirates, alongside long-standing Emirate-level taxes on foreign bank branches (20%) and on oil-and-gas concessions. The combination of a low 9% rate, the Free Zone regime and the absence of personal tax keeps the UAE among the most competitive business locations in the world.

1.1 Sources of law and treaties

Federal Decree-Law No. 47 of 2022 (the Corporate Tax Law) and its implementing Cabinet and Ministerial Decisions, the VAT and Excise Tax laws, and the Tax Procedures Law govern the system, administered by the Federal Tax Authority (FTA). The UAE has one of the world's largest double-taxation-treaty networks and applies the OECD multilateral instrument; FTA guides and public clarifications support interpretation.

1.2 Recent developments

The most consequential recent and pending changes are:

A domestic minimum top-up tax (DMTT) — Federal Decree-Law No. 60 of 2023 and Cabinet Decision No. 142 of 2024 — effective for financial years beginning on or after 1 January 2025, bringing the effective rate on UAE profits of multinational groups with revenue of at least EUR 750 million up to 15%.

Continuing roll-out of the corporate-tax framework through Cabinet and Ministerial Decisions (on Free Zones, transfer pricing, exempt persons, tax groups and reliefs).

An announced research-and-development tax incentive and a high-value-employment incentive to support investment and skilled jobs (effective from 2026, subject to legislation).

Headline statutory corporate income tax rate for a resident company. Where sub-national (state, provincial, cantonal or municipal) corporate taxes apply, the combined rate reported by the OECD is shown. Projected 2026–2028 rates carry the current rate forward unless a change is already enacted or officially scheduled. As-of 2026.

Top marginal statutory personal income tax rate on employment income for a resident individual. Where sub-national (state, provincial, cantonal or municipal) income taxes are a standard part of the system, the combined top rate is shown. Projected 2026–2028 rates carry the current rate forward unless a change is already enacted or officially scheduled. As-of 2026.

2.1 Scope, residence and exempt persons

The corporate tax applies to all business and commercial activities of resident juridical persons (incorporated in the UAE or effectively managed there) on worldwide income, and of non-residents on UAE-source income and the income of a UAE permanent establishment. Natural persons are within scope only on business income above a threshold. Several categories are exempt, subject to conditions — government and government-controlled entities, extractive and non-extractive natural-resource businesses (taxed instead at Emirate level), qualifying public-benefit entities, qualifying investment funds, and regulated pension and social-security funds.

2.2 Rates

Corporate tax is charged at 0% on taxable income up to AED 375,000 and at 9% above that threshold; the qualifying income of a Qualifying Free Zone Person is taxed at 0% (with 9% on non-qualifying income). Foreign bank branches remain subject to 20% under Emirate-level bank decrees, and oil-and-gas and petrochemical companies to the rates in their concession agreements.

2.3 The Free Zone regime

A Qualifying Free Zone Person (QFZP) — a business in one of the UAE's many free zones that maintains adequate substance, earns ‘qualifying income’, satisfies a de-minimis test on non-qualifying revenue, prepares audited financial statements and does not elect to be taxed normally — pays 0% on its qualifying income and 9% on the rest. Qualifying income broadly covers transactions with other free-zone persons and specified ‘qualifying activities’; failing the conditions causes the QFZP to be taxed at 9% on all income for the period and following years. The regime preserves the historic free-zone advantage within the new tax.

2.4 Small-business relief

A resident person with revenue not exceeding AED 3 million in the relevant and previous tax periods may elect small-business relief, under which it is treated as having no taxable income (and faces simplified compliance) — effectively a 0% outcome for genuinely small businesses. The relief is available for tax periods ending on or before 31 December 2026.

2.5 Participation exemption and foreign income

Domestic dividends from UAE companies are exempt, and a participation exemption exempts dividends and capital gains from a ‘participating interest’ — broadly a holding of at least 5% held (or intended to be held) for at least twelve months in a company subject to tax at a sufficient rate. A foreign permanent establishment can be exempted by election, and foreign-tax credit relief is available for income that is taxed abroad and in the UAE. These features make the UAE an efficient holding location.

2.6 Income determination and interest limitation

Taxable income starts from the accounting profit (under IFRS) adjusted for specific tax rules, with deductions for business expenses and limits on entertainment and certain related-party and non-business costs. A general interest-deduction limitation caps net interest expense at 30% of tax-EBITDA (with a de-minimis threshold), and a specific interest rule restricts deductions on certain related-party borrowings; no separate capital-gains tax applies, gains being part of business income (and often covered by the participation exemption).

2.7 Losses and tax groups

Tax losses may be carried forward indefinitely and offset up to 75% of taxable income in a later period, subject to ownership-continuity conditions, and may in some cases be transferred within a group. UAE resident companies under common 95% ownership may form a tax group treated as a single taxable person, filing one return and offsetting members' profits and losses, subject to conditions.

2.8 Transfer pricing

The Corporate Tax Law applies the arm's-length principle and the OECD Guidelines to transactions with related parties and connected persons, supported by a transfer-pricing disclosure form, master-file and local-file requirements above thresholds, and country-by-country reporting for large multinational groups. Transfer pricing is a central compliance focus given the prevalence of related-party and free-zone dealings.

2.9 The domestic minimum top-up tax

Implementing the OECD Pillar Two solution, the UAE applies a domestic minimum top-up tax for financial years beginning on or after 1 January 2025 to multinational groups with consolidated global revenue of at least EUR 750 million in at least two of the four preceding years. The DMTT, closely aligned with the GloBE Model Rules, tops up the effective rate on UAE profits of in-scope groups to 15%, while the 9% (and 0% Free Zone) regime continues to apply to everyone else.

3.1 No personal income tax

The United Arab Emirates levies no personal income tax. Salaries, investment income, rental income and capital gains earned by individuals in a personal capacity are not taxed, and there is no payroll tax on employees, no inheritance or estate tax, and no net wealth tax. This absence of personal taxation is the UAE's defining attraction for internationally mobile individuals and is unaffected by the corporate tax.

3.2 Business income of individuals and residence

An individual is within the corporate tax only to the extent they conduct a business or business activity in the UAE with total turnover above AED 1 million in a calendar year; personal investment, real-estate investment and employment income are expressly outside the charge. Tax residence for treaty purposes is available to qualifying individuals (broadly by reference to days of presence or a permanent place of residence and a centre of financial and personal interests), and the UAE issues tax-residency certificates supporting treaty claims.

3.3 Social security

There is no general social-security tax on the broad expatriate workforce; mandatory pension and social-security contributions apply to UAE and other Gulf-Cooperation-Council national employees, shared between employer and employee. An employer-funded end-of-service gratuity (or an alternative savings scheme) provides for departing employees.

The UAE imposes a withholding tax at 0% — there is, in practice, no withholding on dividends, interest or royalties paid to residents or non-residents. Combined with the UAE's very large treaty network, this makes the UAE an efficient location for financing, licensing and holding structures. Representative position:

5.1 Substance, pricing and the GloBE rules

The UAE's framework rests on the Free Zone substance conditions (Section 2.3), the transfer-pricing rules (Section 2.8) and the Economic Substance Regulations (which require entities carrying on certain ‘relevant activities’ to demonstrate adequate substance and file substance notifications and reports), rather than on a CFC regime. The domestic minimum top-up tax (Section 2.9) implements the global minimum-tax standard for large groups.

5.2 General anti-avoidance and disclosure

The Corporate Tax Law contains a general anti-abuse rule allowing the FTA to counteract transactions or arrangements not entered into for valid commercial reasons and whose main purpose is to obtain a corporate-tax advantage contrary to the law's intent. The UAE applies the OECD treaty-abuse standard, exchanges financial-account information automatically, and requires country-by-country reporting for large multinational groups.

5.3 Foreign tax relief

Double taxation is relieved by the participation exemption and the optional foreign-permanent-establishment exemption and, otherwise, by a foreign-tax credit for foreign tax on income also taxed in the UAE (capped at the UAE tax on that income). The extensive treaty network further reduces source taxation on outbound UAE investment.

6.1 Value-added tax

VAT has applied since 2018 at a standard rate of 5% — among the lowest in the world — with zero-rating for exports, international transport, certain healthcare and education and the first supply of residential property, and exemption for certain financial services and bare land and local passenger transport. Businesses above the registration threshold charge and recover VAT, and reverse-charge and import rules apply.

6.2 Excise tax and customs

Excise tax applies to tobacco and tobacco products and to certain energy and sweetened drinks (at 50% or 100% of the retail price), targeting harmful consumption. Customs duty (generally 5%) applies on imports into the Gulf-Cooperation-Council customs territory, with free-zone and free-trade-agreement reliefs. There is no general sales tax beyond VAT and excise.

6.3 Property and municipal fees

Although there is no recurrent property tax, Emirate-level municipal fees and property-transfer/registration charges apply on real estate (for example a registration fee on Dubai property transfers) and a municipality fee on rented premises in several Emirates. There is no inheritance, estate or net wealth tax.

7.1 Registration, filing and payment

All taxable persons (including Free Zone and exempt-but-registrable persons) must register for corporate tax with the FTA and obtain a registration number. The corporate-tax return is filed electronically within nine months of the end of the tax period, with tax payable by the same date; there are no advance payments. VAT returns are filed monthly or quarterly. The system is fully digital through the FTA's EmaraTax platform.

7.2 Records, audit and clarifications

Taxable persons must keep records (generally for seven years) supporting their returns, including transfer-pricing documentation where required. The FTA conducts audits and can issue assessments, and a private-clarification mechanism provides the FTA's view on the application of the law to specific facts. Administrative penalties apply for late registration, filing and payment and for record-keeping failures.

7.3 Disputes

A taxpayer may request the FTA to reconsider a decision, then escalate to the Tax Disputes Resolution Committee and, ultimately, to the federal courts. The mutual-agreement procedure under the UAE's treaties addresses cross-border double taxation, increasingly relevant as the corporate tax and the global minimum tax take effect.

Indicative deadlines. As-of June 2026.

9.1 Entity choice and free zones

Investors choose between mainland companies, the many free-zone entities and branches. A Qualifying Free Zone Person can retain a 0% rate on its qualifying income while a mainland company pays 9% above AED 375,000, so the choice turns on the customer base (free-zone, mainland or export), the nature of the activity and the substance that can be maintained. Free-zone status is preserved only while the de-minimis and substance conditions are met.

9.2 Holding and financing structures

The UAE is an efficient holding location: the participation exemption covers qualifying dividends and gains, there is no withholding tax, and the treaty network is extensive. Financing must respect the 30%-of-EBITDA general interest-limitation rule and the specific related-party interest rule, and a foreign permanent establishment can be exempted by election — so structuring focuses on substance, qualifying income and treaty access rather than on rate arbitrage.

9.3 A worked illustration

A mainland company with AED 5 million of taxable income pays 0% on the first AED 375,000 and 9% on the remaining AED 4.625 million — about AED 416,000, an effective rate near 8.3% — while a Qualifying Free Zone Person earning only qualifying income pays nothing. A business with revenue under AED 3 million can elect small-business relief and pay no corporate tax for tax periods ending on or before 31 December 2026.

9.4 Compliance and the minimum tax

All taxable persons (including Free Zone and certain exempt persons) register with the Federal Tax Authority and file within nine months of the year-end through the EmaraTax platform, with no advance payments; transfer-pricing disclosure, master and local files and Economic Substance reporting apply. Multinational groups above EUR 750 million face the 15% domestic minimum top-up tax for financial years from 1 January 2025.