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The UAE taxes company profits at three levels. Income up to AED 375,000 is taxed at 0%. Income above that is taxed at 9%. A separate 0% rate can apply to qualifying free zone income, but only for the income the law treats as qualifying.
A third rate, 15%, applies only to a small group of very large multinational groups. Most business owners only deal with the first two. Our UAE corporate tax services explain how each rate applies to your setup.
This guide explains each rate, who it applies to, and where the confusion usually starts.
The Standard Corporate Tax Rate: 0% and 9%
Every UAE company subject to corporate tax uses the same two-tier structure on its taxable income for a tax period:
- 0% on taxable income up to AED 375,000
- 9% on taxable income above AED 375,000
The AED 375,000 figure is not a tax-free allowance you subtract from each year’s profit and forget about. It applies per tax period, and it sits inside the same tax return as the rest of your taxable income calculation. A company earning AED 900,000 in taxable income pays 0% on the first 375,000 and 9% on the remaining 525,000. It does not pay 9% on the full amount.
This structure applies to mainland companies, most branches, and free zone companies that do not qualify for the free zone rate below. It sits under the Corporate Tax Law (Federal Decree-Law No. 47 of 2022), which the Ministry of Finance and Federal Tax Authority administer together.
The Free Zone Rate: 0% on Qualifying Income Only
Free zone companies have a separate rate: 0% on qualifying income, with no 375,000 ceiling. This is where the confusion usually starts. The 0% free zone rate is not automatic, and it does not cover every dirham a free zone company earns.
To use it, a free zone company must be a Qualifying Free Zone Person. In simple terms, that means the company is set up in a free zone, has real substance there, earns income the law treats as qualifying, and has not chosen the standard regime instead.
Income outside the qualifying definition, plus any non-qualifying revenue above the small allowed threshold, gets taxed at 9% instead, even for a company that otherwise qualifies. This is where a lot of businesses slip up. See UAE corporate tax rules for free zone companies for the full conditions and the common reasons free zone companies lose the 0% rate.
The 15% Rate: Only for Very Large Multinational Groups
A third rate exists, but it affects almost no small or mid-sized UAE business: the Domestic Minimum Top-up Tax (DMTT), set at 15%. It applies only to multinational groups with consolidated global revenue above the very high threshold set under the OECD’s Pillar Two framework, and only to raise their effective UAE tax rate to 15% where it would otherwise be lower.
If your business is not part of a large multinational group filing consolidated financial statements in the hundreds of millions of euros, this rate does not apply to you. It mainly matters because it stops people from confusing it with the standard 9% rate when they read UAE tax news.
How the 375,000 Threshold Actually Works
The AED 375,000 figure gets used in two different ways, and mixing them up causes mistakes:
As part of the standard rate structure above, it is the point where the 0% band ends and the 9% band begins. Every taxable person gets this same structure by default.
As the trigger point in Small Business Relief, it is the revenue threshold for a separate election available to resident businesses with revenue at or below AED 3,000,000. Electing Small Business Relief treats the whole business as having no taxable income for that period, which goes further than the standard 0% band. This is a different mechanism with its own conditions, not just a bigger version of the standard threshold. See UAE corporate tax small business relief for the full eligibility rules, because Small Business Relief cannot be combined with Qualifying Free Zone Person status and is time-limited.
Who Does This Rate Apply To?
The rate structure applies once a business is a “taxable person” under the law, but knowing the rate does not tell you whether you need to register and file yet. Sole establishments, freelancers, and some smaller entities have their own scope rules that sit apart from the rate itself. If you are unsure whether your business needs to register at all, start with UAE corporate tax registration eligibility before worrying about which rate applies. Once your entity type is clear, the rate structure feeds into your filing obligations and exemption conditions.
Frequently Asked Questions
Is the UAE corporate tax rate 9% on everything above 375,000, or 9% on the whole amount once you cross 375,000?
Only the amount above AED 375,000 is taxed at 9%. The first 375,000 stays at 0% regardless of total taxable income, in the same way an income tax bracket works in other countries.
Do free zone companies pay 0% on all their income?
No. Only income that meets the legal definition of “qualifying income” for a Qualifying Free Zone Person gets the 0% rate. Other income from the same company is taxed at 9%.
Does the 375,000 threshold apply per company or per group?
It applies per taxable person. Groups filing as a UAE Tax Group are treated as a single taxable person for this purpose, so the threshold applies once to the group, not once per member company.
Will these rates change?
Tax rates and thresholds are set by federal law and Cabinet Decision, and can be amended. Always confirm the current rate and threshold on the Federal Tax Authority or Ministry of Finance website before filing, since this article reflects the rules as published in July 2026.
This article explains the general corporate tax rate structure in the UAE and is not a substitute for advice on your specific tax position. Rules on qualifying income, substance requirements, and reliefs depend on the facts of each case. Speak with our team for corporate tax help in UAE before filing or electing any relief.
