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The UAE is no longer a "no tax" jurisdiction for business. Federal Corporate Tax applies to financial years starting on or after 1 June 2023, and VAT has applied since 1 January 2018. For Pakistani groups with UAE subsidiaries, overseas Pakistanis with businesses in the Emirates and investors using the UAE as a regional hub, getting the basics right avoids fixed penalties and protects valuable reliefs.
UAE Corporate Tax at a glance
Corporate Tax is levied under Federal Decree-Law No. 47 of 2022 on the Taxation of Corporations and Businesses and administered by the Federal Tax Authority (FTA) through its EmaraTax portal.
| Point | Position |
|---|---|
| Rates | 0% on taxable income up to AED 375,000; 9% on the portion above it |
| Who is in scope | UAE companies (mainland and free zone), foreign companies with a UAE permanent establishment or nexus, and individuals whose UAE business turnover exceeds AED 1 million in a calendar year (wages and personal investment income are excluded) |
| Return and payment | Within nine months of the end of the tax period — for a 31 December 2025 year end, by 30 September 2026 |
| Accounting basis | IFRS; IFRS for SMEs may be used where revenue does not exceed AED 50 million |
| Audited accounts | Required where revenue exceeds AED 50 million, and for every Qualifying Free Zone Person |
| Large multinationals | A 15% Domestic Minimum Top-up Tax applies to groups within the OECD Pillar Two scope (consolidated revenue of EUR 750 million or more) from 2025 |
From accounting profit to taxable income
Taxable income starts from accounting profit, then adjusts it: qualifying dividends and capital gains can be exempt, entertainment is only partly deductible, net interest expense is capped by reference to EBITDA, and losses carry forward subject to limits. Clean IFRS accounts make the return straightforward.
Free zone companies: keeping the 0% rate
A free zone company is within the Corporate Tax net and must register and file. If it is a Qualifying Free Zone Person (QFZP), it pays 0% on qualifying income and 9% on everything else — without the AED 375,000 nil band. To qualify, the company must:
- maintain adequate substance in the free zone;
- derive qualifying income — broadly, income from transactions with other free zone persons (other than excluded activities), and income from transactions with anyone else, including foreign customers, only where it comes from a listed qualifying activity such as manufacturing, processing, holding shares, qualifying trading, logistics, or treasury and financing services to related parties;
- keep non-qualifying revenue within the de minimis limit: the lower of 5% of total revenue or AED 5 million;
- price related-party dealings at arm's length and keep transfer pricing documentation;
- prepare audited financial statements, and not elect to be taxed at the standard rates.
Failing any condition ends QFZP status for that tax period and the following four. Service income from mainland and overseas customers is non-qualifying unless it comes from a qualifying activity, so free zone groups should review their contracts each year.
Small Business Relief — now extended to 2029
Resident businesses whose revenue is AED 3 million or less in the current tax period, and in every earlier period, can elect to be treated as having no taxable income. The relief originally covered tax periods ending on or before 31 December 2026. Ministerial Decision No. 131 of 2026, announced in August 2026, extends it to tax periods ending on or before 31 December 2029; the AED 3 million threshold is unchanged.
The relief must be elected in the return — you still register and file. It is not available to QFZPs or to members of multinational groups with consolidated revenue above AED 3.15 billion, electing it affects the carry-forward of losses, and the FTA can disregard an artificial split of a business made to stay under the threshold.
Registration and filing deadlines
Registration deadlines are set by FTA Decision No. 3 of 2024 and depend on the type of person. A newly incorporated resident company generally has three months from incorporation; a resident individual has until 31 March of the year after their business turnover first exceeds AED 1 million. Late registration attracts a fixed AED 10,000 administrative penalty. Returns and payment are due within nine months of the end of each tax period.
Transfer pricing and documentation
Transactions with related parties and payments to connected persons (such as owners and directors) must reflect arm's-length terms. Under Ministerial Decision No. 97 of 2023, a Master File and Local File are required where the business's revenue is AED 200 million or more, or it belongs to a multinational group with consolidated revenue of AED 3.15 billion or more; they are produced within 30 days of an FTA request. Separately, a transfer pricing disclosure form is filed with the return where related-party transactions exceed AED 40 million in total, and payments to a single connected person above AED 500,000 are disclosed.
For Pakistani groups, remember that the same transaction is also tested in Pakistan: section 108 of the Income Tax Ordinance 2001 requires dealings between associates to be at arm's length, so pricing should be documented consistently on both sides.
UAE VAT essentials
VAT is charged at a standard rate of 5% under Federal Decree-Law No. 8 of 2017, with exports and international transport generally zero-rated and certain financial services and residential property exempt.
| Situation | Requirement |
|---|---|
| Taxable supplies and imports above AED 375,000 in the last 12 months, or expected within the next 30 days | Mandatory registration |
| Supplies, imports or taxable expenses above AED 187,500 | Voluntary registration available |
| Non-resident business making taxable supplies in the UAE | No threshold — registration may be required from the first supply |
| Returns | Usually quarterly, due by the 28th day after the period ends; the FTA may assign monthly periods |
A UAE-registered business buying services from a Pakistani supplier generally accounts for the VAT itself under the reverse charge, so the supplier usually need not register — but confirm the position for goods and other place-of-supply cases.
E-invoicing: the 2027 timeline
Ministerial Decisions No. 243 and 244 of 2025 set the scope and timetable of the UAE's electronic invoicing system. Business-to-business and business-to-government invoices are in scope; business-to-consumer sales are outside the mandatory phase. Invoices are exchanged in a structured format through Accredited Service Providers (ASPs), with data shared with the FTA.
| Group | Appoint an ASP by | Mandatory from |
|---|---|---|
| Revenue of AED 50 million or more | 30 October 2026 (extended from 31 July 2026) | 1 January 2027 |
| Revenue below AED 50 million | 31 March 2027 | 1 July 2027 |
A voluntary pilot began on 1 July 2026; government entities follow later. Use the run-up to clean customer and supplier master data, especially Tax Registration Numbers.
The Pakistan connection
Pakistan and the UAE signed an agreement for the avoidance of double taxation in 1993. Whether it helps you depends on your residence and the evidence you hold, so check the current text before relying on it. Pakistani residents are taxed on worldwide income: UAE profits, salaries and rent still belong in the Pakistani return, with relief for any foreign tax under the treaty or domestic rules.
Your UAE compliance checklist
- Every entity — and every individual whose UAE business turnover exceeds AED 1 million in a calendar year — registered for Corporate Tax on EmaraTax
- Tax period confirmed, and the nine-month return deadline in the compliance calendar
- Free zone entities: qualifying income and the de minimis test reviewed every year; substance documented; accounts audited
- Small Business Relief considered where revenue is AED 3 million or less
- Related-party and connected-person transactions priced, documented and ready for the disclosure form
- VAT threshold monitored monthly; returns filed by the 28th day after each period
- E-invoicing service provider appointed by the deadline for your revenue band
- Pakistani reporting of UAE income and assets aligned with the UAE filings
How Veridian can help
Our Taxation and Related Advisory Services practice advises on UAE Corporate Tax and VAT — registrations, returns, free zone analysis, transfer pricing and treaty questions — supporting cross-border engagements from our Karachi head office. Our Accounting & Financial Reporting practice prepares the IFRS accounts the returns depend on, and our corporate secretarial practice supports group structures. See how we work across Pakistan, the UAE, the UK and Saudi Arabia on our jurisdictions page, and read our companion guide to tax in Saudi Arabia.
Planning a UAE structure, or unsure where you stand? Book a consultation and talk to us.
This guide reflects our understanding of the rules as at October 2026. UAE tax rules and deadlines change often — check the latest Ministry of Finance and FTA publications, or ask us, before acting.
Frequently asked questions
Do UAE free zone companies pay Corporate Tax?
Free zone companies are within the Corporate Tax regime and must register and file. A Qualifying Free Zone Person pays 0% on qualifying income and 9% on other taxable income, provided it meets the substance, de minimis, transfer pricing and audit conditions.
When is the UAE Corporate Tax return due?
Within nine months of the end of the tax period, together with payment. For a financial year ending 31 December 2025, the deadline was 30 September 2026.
Has UAE Small Business Relief been extended?
Yes. Ministerial Decision No. 131 of 2026 extends the relief to tax periods ending on or before 31 December 2029. The AED 3 million revenue threshold is unchanged and the relief must still be elected in the return.
This guide is general information based on the law as we understand it on the date shown, not advice for your situation. Tax rules change often — please speak to us before acting on it. See our disclaimer.