Corporate tax has changed the way companies in the UAE think about compliance and financial planning. Since June 2023, the country has applied a 0% tax on the first AED 375,000 of taxable income and 9% on profits above that amount. For decades, the UAE was seen as a tax-free jurisdiction. Today, businesses must navigate a modern corporate tax framework that balances competitiveness with global standards.
This guide explains who needs to register, what obligations exist, common mistakes to avoid, and how SMEs can prepare effectively in 2025.
All Taxable Persons must register with the Federal Tax Authority (FTA). This includes:
• UAE Companies and Branches – Whether onshore or in a free zone, all entities must register and file returns.
• Free Zone Entities – Even if they expect to benefit from the special 0% Free Zone regime, they must still register and file annually.
• Non-Resident Entities – Foreign businesses must register if they maintain a permanent establishment or nexus in the UAE.
• Natural Persons (Individuals) – Registration is required if they are conducting business activities (for example, consultancy or trading as an individual) and their annual turnover exceeds AED 1 million.
👉 Important clarification: The AED 375,000 figure is not a registration threshold. It only determines when the 9% tax rate applies. Even if profits fall below this, companies must still register and file returns.
1. Registration Deadlines
Businesses must register within the timelines set by FTA Decision No. 3 of 2024. Missing this can trigger a AED 10,000 late registration penalty.
2. Annual Corporate Tax Return
Every taxable business must file one return per year, even if no tax is due. Unlike VAT, there are no quarterly submissions.
3. Financial Records
Companies must prepare and maintain financial statements, ideally following International Financial Reporting Standards (IFRS). Supporting documents — invoices, contracts, payroll records, and reconciliations — should be kept for at least five years.
4. Transfer Pricing
Businesses with related-party transactions must comply with OECD-style transfer pricing rules, maintaining documentation to show transactions are at arm’s length.
• Assuming small businesses are exempt: Even if profits are below AED 375,000, companies must register and file.
• Poor record-keeping: Invoices thrown into a drawer or inconsistent ledgers can create problems if the FTA audits.
• Mixing personal and business expenses: Deductibility is restricted to legitimate business costs.
• Delaying tax planning: Waiting until year-end to calculate liabilities often results in missed opportunities to optimize.
1. Strengthen Bookkeeping
Shift from cash-basis, informal accounting to structured, accrual-based bookkeeping that aligns with IFRS.
2. Forecast Tax Liabilities
Track profits throughout the year and estimate potential corporate tax to avoid surprises.
3. Engage Consultants
Professional advisors can guide on FTA registration, return preparation, and structuring operations for efficiency.
4. Train Staff
Ensure internal finance teams understand which expenses are deductible, what records to retain, and how to prepare for audits.
While many business owners view corporate tax as a burden, it can create value when handled correctly. Accurate tax filings backed by IFRS-compliant financials improve credibility with banks, investors, and international partners. Companies with clean reporting often find it easier to secure financing and expand into new markets.
1. Do all free zone companies pay 0% tax?
Not necessarily. Only qualifying free zone persons that meet specific requirements (such as conducting business with foreign markets and keeping adequate substance) may enjoy the 0% regime. Others are subject to normal 9% tax.
2. What happens if I don’t register on time?
The FTA imposes a AED 10,000 penalty for late registration, in addition to any further fines for failing to file returns.
3. If my business makes less than AED 375,000 profit, do I still need to file?
Yes. Filing is mandatory for all registered taxable persons, regardless of profit level. The difference is that your profits up to AED 375,000 will be taxed at 0%.
Corporate tax is no longer optional knowledge for UAE business owners. By registering on time, keeping clean records, and working with trusted consultants, companies can transform tax compliance into a source of confidence and growth.
Key takeaway: The 0% rate on the first AED 375,000 provides relief for smaller firms, but registration and annual filing remain obligations for all. Proactive preparation ensures your business avoids penalties and builds a stronger financial future