Key Takeaways
- New UAE companies, including free zone companies expecting 0%, register for Corporate Tax within 3 months of incorporation (FTA Decision 3 of 2024).
- Late registration costs AED 10,000, and a late return AED 500 a month for the first 12 months (Cabinet Decision 75 of 2023).
- Small Business Relief now runs to tax periods ending by 31 December 2029, for revenue up to AED 3 million (Ministry of Finance).
- A Qualifying Free Zone Person loses its status for five periods if non-qualifying revenue passes the lower of 5% of revenue or AED 5 million.
- The first return and the payment are both due within 9 months of the end of the financial year.
Corporate Tax registration in the UAE is mandatory for a new company even when you expect to pay nothing. The deadline, the rates, the test for the 0% rate and the penalties follow, as of October 2026. They apply to companies, because individuals follow a different turnover test.
Corporate Tax registration deadline and who must register
New resident juridical persons incorporated on or after 1 March 2024, Free Zone Persons included, register within 3 months of incorporation, establishment or recognition (FTA Decision 3 of 2024). A foreign-incorporated entity that is effectively managed and controlled in the UAE registers within 3 months of the end of its financial year. FTA Decision 12 of 2026, issued on 16 July 2026, changes registration timelines only for entities in scope of the Pillar Two minimum tax; it does not change the three-month rule for ordinary companies.
Free zone companies are Taxable Persons like any other. A 0% rate is the result of the Corporate Tax calculation, not an exemption from registration. Late registration carries an AED 10,000 penalty (Cabinet Decision 75 of 2023, as amended by Cabinet Decision 10 of 2024).
Individuals are a separate case. A natural person is taxed on business activity only when gross turnover exceeds AED 1,000,000 in a calendar year (Cabinet Decision 49 of 2023, as of October 2026), and the freelance permit guide shows where that test applies.
VAT is a separate registration with its own numbers. It is mandatory above AED 375,000 of taxable supplies and imports over the previous 12 months and voluntary from AED 187,500. The application is due within 30 days of becoming liable (VAT Executive Regulation). A new VAT penalty table has applied since 14 April 2026 (Cabinet Decision 129 of 2025), so read the FTA's current table before you rely on any VAT penalty figure. Note that the AED 375,000 VAT threshold counts supplies and imports, while the AED 375,000 band in the next section counts taxable income. They are separate tests.
The UAE Corporate Tax rate, the AED 375,000 band and Small Business Relief to 2029
Taxable income up to AED 375,000 is taxed at 0% and the part above it at 9% (Cabinet Decision 116 of 2022). A Qualifying Free Zone Person gets no AED 375,000 band: it pays 0% on Qualifying Income and 9% on its other taxable income.
Small Business Relief lets a company elect to be treated as having no taxable income. Revenue in the period and in every earlier period must not exceed AED 3,000,000 (Ministerial Decision 73 of 2023). Ministerial Decision 131 of 2026, announced by the Ministry of Finance on 7 August 2026, extends the relief to tax periods ending on or before 31 December 2029.
Relief is an election made in the return, so you must be registered to claim it. The election is lost if revenue exceeds AED 3 million in any relevant period. Election-year losses cannot be carried forward, and a Qualifying Free Zone Person or a member of a multinational group with consolidated revenue of AED 3.15 billion or more cannot use the relief at all.
Free zone companies and the QFZP conditions
Qualifying Free Zone Person (QFZP) is the label for a free zone company that can reach the 0% rate. It must meet four statutory conditions (Federal Decree-Law 47 of 2022, Article 18). They are adequate substance in the UAE, Qualifying Income, no election to be taxed under the standard regime, and compliance with the arm's length and transfer pricing documentation rules. Substance means core income-generating activities in the free zone, with adequate assets, full-time employees and operating expenditure.
Ministerial Decision 229 of 2025 adds two conditions: non-qualifying revenue within the de minimis, and audited financial statements whatever the revenue. The de minimis is the lower of 5% of total revenue or AED 5,000,000 in the tax period. Fail it, and the company stops being a QFZP from the start of that period and for the next four tax periods.
Qualifying and non-qualifying income in plain examples
Qualifying Income depends on who pays and what is sold, and where the licence sits does not change that. These four cases follow Ministerial Decision 229 of 2025 and the FTA guide on the regime.
- Manufacturer in a free zone selling goods to a mainland distributor: manufacturing is a Qualifying Activity, so the sale can be Qualifying Income.
- Consultancy in a free zone invoicing a mainland company: ordinary services income from non-free-zone customers is not Qualifying Income and counts against the de minimis.
- Online shop in a free zone selling to consumers: transactions with natural persons are Excluded Activities, so that income is non-qualifying.
- Free zone company invoicing another for a non-excluded activity: this can be Qualifying Income if the other company is the beneficial recipient.
Founders often assume 0% for ordinary services income from mainland customers. Once non-qualifying revenue passes the de minimis, the company is not a QFZP for that period and the next four, and it pays under the standard 0% and 9% bands instead.
Check the zone before you build a distribution model. Distribution counts as a Qualifying Activity only in or from a Designated Zone under Cabinet Decision 59 of 2017 as amended, and only for the customers that Ministerial Decision 229 of 2025 names.
Financial years, return and payment deadlines
Tax periods follow the financial year, either the Gregorian calendar year or the 12-month period for which financial statements are prepared. The return and the payment are both due within 9 months of the end of the tax period (Federal Decree-Law 47 of 2022, Articles 48 and 53). For a year ended 31 December 2025 that meant 30 September 2026.
First financial years can run from 6 to 18 months under the Commercial Companies Law (Article 28, which Federal Decree-Law 20 of 2025 did not amend), so the first return depends on your first period end. Choose the year end before you register, since a later change needs an application to the FTA (Article 58). Registration and filing run through EmaraTax, the FTA portal, and FTA services require UAE Pass.
Penalties that apply to new companies
Penalties for Corporate Tax sit in their own table, Cabinet Decision 75 of 2023 as amended by Cabinet Decision 10 of 2024. Since 14 April 2026 a different table, Cabinet Decision 40 of 2017 as amended by Cabinet Decision 129 of 2025, applies to VAT, excise and tax procedure violations and does not replace this one. The English text of the Corporate Tax table on tax.gov.ae is not an official translation.
| Violation | Penalty | As of |
|---|---|---|
| Late Corporate Tax registration | AED 10,000 | October 2026 |
| Late return | AED 500 a month or part for the first 12 months, then AED 1,000 a month | October 2026 |
| Late payment of tax | Monthly penalty of 14% a year on the unpaid tax | October 2026 |
| Required records not kept | AED 10,000, or AED 20,000 if repeated within 24 months | October 2026 |
| Change to the tax record not notified | AED 1,000, or AED 5,000 if repeated within 24 months | October 2026 |
| Incorrect return | AED 500 | October 2026 |
The other common slip is skipping registration because the rate is 0%. The penalty is AED 10,000 before any tax is due, and Small Business Relief is an election made in the return, which needs a registration.
What to prepare before the first return
Four things start in the first month. They are accounting records, the choice of financial year end, a split of qualifying and non-qualifying revenue for a free zone company, and audited statements for an expected QFZP. The records can be kept by an accounting firm in a form the return can use. The step-by-step guide to setting up in Dubai shows where registration falls in the order of work.
If you will need a UAE Tax Residency Certificate for a treaty claim, note the timing. A company must have been incorporated for at least 12 months before it can apply, and it can then apply for a period still running once three months of that period have passed. The FTA charges an AED 50 submission fee plus AED 500 for the electronic certificate with a Corporate Tax registration number, or AED 1,750 without one. It states ten business days once the application is complete (FTA service page, updated 11 August 2026).
Two decisions justify a call with a corporate tax consultant: whether you qualify as a QFZP, and the first return. A single-owner company with ordinary services income can often register alone in EmaraTax, and the free zone company guide shows which structures need the second look.
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