The business landscape in the UAE has evolved. With the introduction of the Corporate Tax law, many new entrepreneurs and investors are asking: "Does my small business have to pay tax?"
At Proemirazone, we believe that compliance is the foundation of success. The good news is that the UAE’s tax regime remains one of the most business-friendly in the world. Here is what you need to know before you start.
1. The 0% Threshold: Keeping it Competitive
The UAE Corporate Tax system is designed to support startups and SMEs.
0% Tax Rate
Applies to taxable income up to AED 375,000.
9% Tax Rate
Applies only to the portion of taxable income that exceeds AED 375,000.
This means if your net profit is below this threshold, you may not have a tax liability, but you must still register.
2. Small Business Relief (The Safety Net)
To further support small enterprises, the government introduced "Small Business Relief." If your revenue (not profit) is below AED 3 million in a tax period (ending before or on 31 December 2026), you can elect to be treated as having no taxable income during that period.
* Note: Proper accounting records are required to claim this relief.
3. Free Zone Companies: Are They Exempt?
This is a common misconception. Free Zone persons are subject to Corporate Tax, but they can benefit from a 0% Corporate Tax rate on "Qualifying Income."
- Qualifying Income: Generally includes income from transactions with other Free Zone persons or specific qualifying activities.
- Non-Qualifying Income: May be taxed at 9%.
4. Mandatory Registration
Even if your business falls under the 0% bracket or claims Small Business Relief, registration is mandatory. Failing to register with the Federal Tax Authority (FTA) within the specified timeline can lead to significant administrative penalties.
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