UAE Corporate Tax (CT) came into effect for most businesses with financial years starting on or after 1 June 2023. Here is a step-by-step guide to calculating your UAE CT liability in 2025.
UAE Corporate Tax Rates
Standard UAE CT rate: 9% on taxable income above AED 375,000. First AED 375,000 of taxable income: 0% (effective tax-free threshold). Small Business Relief: if your revenue is under AED 3,000,000 and you elect for Small Business Relief: treat all taxable income as zero for the CT period (0% effective CT rate). Qualified Free Zone Person (QFZP): free zone companies that meet QFZP criteria: 0% CT on qualifying income, 9% CT on non-qualifying income.
Step-by-Step CT Calculation (Standard Company)
Step 1: Start with your accounting net profit (from your financial statements). Step 2: Add back non-deductible expenses: 50% of entertainment expenses (if above AED 150,000/year), interest expense above 30% of EBITDA (interest limitation rule), penalties and fines (non-deductible), capital withdrawals by partners/shareholders. Step 3: Deduct exempt income: dividends received from UAE or foreign subsidiaries (participation exemption), capital gains on qualifying shares (participation exemption). Step 4: Adjusted net profit = taxable income. Step 5: Apply CT: First AED 375,000 x 0%, remaining taxable income x 9%. CT payable = 9% x (Taxable Income – AED 375,000).
CT Calculation Example
Company A: Revenue AED 5,000,000. Net profit (accounts): AED 800,000. Add back: non-deductible fines AED 10,000. Taxable income: AED 810,000. CT = 9% x (AED 810,000 – AED 375,000) = 9% x AED 435,000 = AED 39,150. Effective CT rate: AED 39,150 / AED 800,000 = 4.9%. The effective rate is below 9% because the first AED 375,000 is exempt.