Tariq had run his Dubai trading company for eleven years without a single tax filing obligation. When UAE Corporate Tax took effect for his financial year, he assumed it would work like everything else in the UAE — straightforward. His first filing missed deductions he was entitled to and came close to a late-registration penalty. His story isn't unusual; it's close to the median UAE SME experience with Corporate Tax so far.
The Basics: What Is UAE Corporate Tax?
Established under Federal Decree-Law No. 47 of 2022, UAE Corporate Tax took effect for financial years starting on or after 1 June 2023. It applies a 9% rate on taxable income above AED 375,000 annually; income below that threshold is taxed at 0%. In practice: a business with AED 300,000 in annual profit owes zero Corporate Tax. One with AED 600,000 in profit owes AED 20,250. One with AED 2,000,000 in profit owes AED 146,250.
The Small Business Relief Window Has Closed
Small Business Relief let businesses with revenue below AED 3 million elect to be treated as having no taxable income, through the 2025 tax year. That relief has now ended — for the 2026 tax year onward, eligible businesses must file standard Corporate Tax returns and pay whatever is owed under the normal rules. Any business still planning around Small Business Relief as an ongoing option is planning around a provision that no longer applies.
What the FTA Actually Audits
Four areas draw consistent scrutiny: transfer pricing between related parties, Free Zone Qualifying Income claims, expense deductibility limits, and basic registration compliance — late registration alone carries a fixed AED 10,000 penalty, independent of any tax actually owed.
A Practical Compliance Checklist
Businesses that stay ahead of Corporate Tax obligations generally have all of the following confirmed: FTA registration completed and TRN in hand, financial year correctly established, Small Business Relief eligibility reassessed given its expiry, Free Zone status and Qualifying Income position documented, related-party transactions properly recorded, expense deductibility reviewed against the rules, accounting maintained to the required standard, and audited financial statements prepared where applicable.