UAE corporate tax is 9% of taxable income above AED 375,000, not 9% of revenue or of your whole profit. To calculate it, start with the accounting profit in your financial statements, add back expenses the law does not allow, remove exempt income, set off any tax losses, and then apply 0% to the first AED 375,000 and 9% to the rest. A company with AED 720,000 of taxable income pays AED 31,050, not AED 64,800. This guide shows the corporate tax formula, each adjustment, and five worked examples you can follow line by line.
Key Takeaways
● Tax is charged on taxable income, not revenue. A business with AED 5 million revenue but AED 200,000 taxable income pays nothing.
● The first AED 375,000 is taxed at 0%. Only taxable income above that is taxed at 9%, once per taxable person per tax period.
● Accounting profit is only the starting point. Fines, half of client entertainment and some donations are added back; UAE dividends are taken out.
● Losses reduce tax, but only up to 75%. Brought-forward losses can offset up to 75% of taxable income in a year.
● Some businesses skip the calculation. Small Business Relief or the Qualifying Free Zone Person regime change the result completely.
How Is Corporate Tax Calculated in the UAE?
The UAE corporate tax calculation follows the same five steps for every business. This is the corporate tax formula UAE businesses use:
Step | What you do | Result |
|---|---|---|
1 | Take accounting profit before tax from your financial statements | Accounting profit |
2 | Add back non-deductible expenses | |
3 | Deduct exempt income and other allowed adjustments | Taxable income before losses |
4 | Set off tax losses brought forward (up to 75%) | Taxable income |
5 | Apply 0% up to AED 375,000 and 9% above | Corporate tax payable |
Put simply, the corporate tax payable calculation in the UAE is: corporate tax payable = 9% × (taxable income − AED 375,000), when taxable income is above AED 375,000. Below that, the tax is zero. This AED 375,000 calculation is the same for every resident business, so before you calculate corporate tax in the UAE (9% above the threshold), you need the right taxable income.
UAE Corporate Tax Rate 2026
Type of taxable person | Rate |
|---|---|
Resident company or individual, taxable income up to AED 375,000 | 0% |
Taxable income above AED 375,000 | 9% on the part above AED 375,000 |
Qualifying Free Zone Person, qualifying income | 0% |
Qualifying Free Zone Person, non-qualifying income | 9% |
Large multinational groups (consolidated revenue of EUR 750 million or more) | Domestic Minimum Top-up Tax brings the effective rate to 15% |
The 9% corporate tax calculation only touches profit above the threshold. That is why a quick "9% of profit" estimate always overstates the bill.
Step 1: Start With Accounting Profit
Your financial statements are the base of every corporate tax computation in the UAE. Most businesses prepare them under IFRS; businesses with revenue below AED 3 million can use the cash basis. The corporate tax on profit in the UAE is worked out from these numbers, so if the accounts are wrong, the tax is wrong. Keeping proper books through the year is the easiest way to make the calculation straightforward; our bookkeeping services in Dubai are set up for exactly that.
Step 2: Corporate Tax Adjustments in the UAE (Book-to-Tax)
The taxable income calculation for UAE corporate tax is where most of the work sits. How to calculate taxable income in the UAE: move from accounting profit to taxable income by making tax adjustments, known as book-to-tax adjustments. The most common book-to-tax adjustments UAE SMEs make are:
Adjustment | Effect on taxable income |
|---|---|
Fines and penalties paid to authorities | Added back (not deductible) |
50% of client entertainment, meals and hospitality | Added back |
Donations to entities that are not approved public benefit entities | Added back |
Corporate tax itself and recoverable input VAT | Added back |
General bad debt provisions (not specific write-offs) | Usually added back |
Dividends from UAE companies | Deducted (exempt income) |
Qualifying participation income from foreign subsidiaries | Deducted when the participation exemption conditions are met |
Related-party transactions not at market value | Adjusted to arm's length value |
For the full list of what can and cannot be deducted, see our guide to non-deductible expenses in UAE corporate tax.
Interest Limitation Rule Calculation in the UAE
If your net interest expense is AED 12 million or less, it is deductible in full. Above that, net interest is capped at the higher of AED 12 million or 30% of tax-adjusted EBITDA. Any excess can be carried forward for up to ten tax periods. Most SMEs never reach this limit, but groups with large borrowings should check it every year.
Step 3: Set Off Tax Losses
A corporate tax calculation with tax losses in the UAE applies a cap: losses brought forward can reduce taxable income by up to 75% in any one period. The rest of the loss carries forward. Losses only count if they arose after the business became a taxable person and were recorded in a filed return, and they can be lost after a major change in ownership unless the business continues the same activity.
Corporate Tax Calculation in the UAE: Five Worked Examples
Example 1: Dubai Mainland Trading Company
Line | AED |
|---|---|
Accounting profit before tax | 950,000 |
Add: fines and penalties | 15,000 |
Add: 50% of AED 40,000 client entertainment | 20,000 |
Add: donation to a non-approved entity | 5,000 |
Less: dividends received from a UAE company | (60,000) |
Taxable income | 930,000 |
First AED 375,000 at 0% | 0 |
Remaining AED 555,000 at 9% | 49,950 |
Corporate tax payable | 49,950 |
This 9% corporate tax calculation example is the standard corporate tax calculation in Dubai for a profitable SME. Without the adjustments, a simple 9% on profit above the threshold would have given AED 51,750, so the adjustments matter in both directions.
Example 2: Small Business With Profit Below the Threshold
A consultancy has AED 300,000 of taxable income. All of it falls in the 0% band, so corporate tax payable is AED 0. It still has to file a return. For a corporate tax calculation for a small business in the UAE, this is often the answer: register, file, pay nothing.
Example 3: Corporate Tax Calculation With Small Business Relief
A company has revenue of AED 2.4 million and accounting profit of AED 600,000. Without relief, tax would be 9% × AED 225,000 = AED 20,250. Because revenue is below AED 3 million in this and every earlier period, it elects Small Business Relief and is treated as having no taxable income, so tax is AED 0. The trade-off: in a relief year you cannot use or carry forward tax losses. Small Business Relief is available for tax periods ending on or before 31 December 2029; see our Small Business Relief guide.
Example 4: Using Tax Losses Brought Forward
Line | AED |
|---|---|
Taxable income before losses | 800,000 |
Tax losses brought forward | 900,000 |
Maximum loss offset (75% × 800,000) | (600,000) |
Taxable income after losses | 200,000 |
Corporate tax payable (all within the 0% band) | 0 |
Losses still carried forward | 300,000 |
Example 5: Corporate Tax Calculation for a Free Zone Company
A Qualifying Free Zone Person earns AED 2,000,000 of qualifying income and AED 80,000 of non-qualifying income. The non-qualifying income is 3.8% of total revenue, so it stays within the de minimis limit (the lower of 5% or AED 5 million). The qualifying income is taxed at 0% and the AED 80,000 of non-qualifying income at 9%, giving AED 7,200 of tax. If the de minimis limit were breached, the company would lose the 0% rate on everything for that year and the next four. Read more about free zone qualifying income.
How Much Corporate Tax Will I Pay in the UAE? Quick Reference
Taxable income (AED) | Corporate tax payable (AED) |
|---|---|
375,000 | 0 |
500,000 | 11,250 |
750,000 | 33,750 |
1,000,000 | 56,250 |
2,000,000 | 146,250 |
5,000,000 | 416,250 |
These figures assume no reliefs and a resident taxable person. A corporate tax calculator in the UAE gives the same numbers, but only if you enter taxable income, not revenue or raw profit. Many businesses keep a simple corporate tax calculation sheet in the UAE format above, so the figure can be checked before the return is filed.
Common Mistakes in the Corporate Tax Calculation
● Applying 9% to revenue. Tax is on taxable income only.
● Forgetting the AED 375,000 band. It applies to every resident taxable person, every year.
● Deducting all entertainment. Only half of client entertainment is deductible.
● Missing exempt income. UAE dividends are not taxed, so leaving them in overstates the bill.
● Using losses beyond 75%. The cap applies every year.
● Electing Small Business Relief without checking losses. Relief years block loss use and carry-forward.
Get Your Corporate Tax Calculated and Filed Correctly
Getting the step by step corporate tax calculation in the UAE right is mostly about the adjustments, the reliefs and the timing of losses, and those are where most errors happen. Our team works out your taxable income, checks every relief you qualify for and submits the return through our corporate tax return filing in Dubai service. If you want to reduce next year's bill legally, our corporate tax planning team can help. When you are ready, book a free consultation and send us your latest accounts.