UAE Corporate Tax: 0% up to AED 375,000, 9% Above — A Plain-English Guide for SMEs

Federal Decree-Law No. 47 of 2022 introduced UAE corporate tax for tax periods commencing on or after 1 June 2023. The headline structure is two brackets: 0% on the first AED 375,000 of taxable income, 9% on taxable income above AED 375,000. That is the math. Everything else — Free Zone rules, Pillar Two, Small Business Relief — sits on top of that base.

This guide is the plain-English version: when it started, how the brackets work, what taxable income actually is, and what an SME pays at common revenue levels.

Effective date

Corporate tax applies to tax periods starting on or after 1 June 2023. For a business with a calendar-year tax period (1 January – 31 December), the first taxable period was FY2024 (1 Jan 2024 – 31 Dec 2024), with the first return due by 30 September 2025.

For a business whose financial year starts mid-year (e.g. 1 July 2023), the first tax period began on 1 July 2023 and ended 30 June 2024, with the return due nine months later (31 March 2025).

The brackets

Two brackets, applied to taxable income (not revenue):

• 0% on taxable income up to and including AED 375,000.
• 9% on taxable income above AED 375,000.
• 15% Domestic Minimum Top-up Tax for large multinational enterprises with consolidated global revenue ≥ EUR 750M (Pillar Two — does not affect UAE SMEs).

Worked examples

Three real SME scenarios. All figures are taxable income — i.e. revenue minus deductible expenses minus exempt income, with appropriate adjustments.

• Taxable income AED 300,000 → tax = 0 (entire amount under threshold).
• Taxable income AED 500,000 → tax = (500,000 − 375,000) × 9% = AED 11,250.
• Taxable income AED 1,200,000 → tax = (1,200,000 − 375,000) × 9% = AED 74,250.
• Taxable income AED 5,000,000 → tax = (5,000,000 − 375,000) × 9% = AED 416,250.

Revenue vs. taxable income — important

The AED 375,000 threshold applies to taxable income, not revenue. A business with AED 1.5M in invoiced revenue but AED 1.1M in deductible expenses (rent, salaries, software, depreciation, professional fees) has only AED 400,000 in taxable income — and therefore pays 9% on AED 25,000, not on AED 1,125,000.

Which is why disciplined expense tracking matters even more after corporate tax than before. Every legitimate expense that gets logged is a deduction. See The Real Cost of Late Invoicing for the same principle on the revenue side.

Small Business Relief — the temporary exit

If your revenue is under AED 3M, you may elect Small Business Relief for tax periods ending on or before 31 December 2026, which treats your taxable income as zero for that period. After that election sunsets, the standard 0% / 9% brackets apply.

Filing and payment timeline

Corporate tax returns are filed and paid within nine months of the end of the tax period. For a calendar-year filer, FY2026 ends 31 December 2026; the return and payment are due by 30 September 2027. There is no advance/quarterly payment requirement for SMEs — it is one annual filing.

What this means for bookkeeping

Three things, all best handled monthly rather than at year-end:

• Recognise revenue on issue date, not paid date — that is what FTA expects.
• Capture expenses with category, supplier, VAT amount, and a receipt — every entry is a potential deduction.
• Run the P&L every month so you know which bracket you are in. If you are flirting with AED 375,000 of taxable income mid-year, you have time to plan.

The Hisabi version

Hisabi tracks invoice revenue and expenses in the same system, with FTA-compliant invoice formats, AED defaulting, and a live P&L tab that shows revenue, expenses, and net profit by month and YTD. Hand the CSV export to your tax adviser and the corporate tax return is straightforward. Get started free at hisabi.ai/login.