UAE Corporate Tax (CT) was introduced at 9% on taxable income above AED 375,000 for financial years starting on or after 1 June 2023. Here is how to calculate your UAE CT liability step by step.
Step 1: Determine Your Accounting Net Profit
Start with your annual net profit from audited financial statements (P&L). This is your revenue minus all operating costs, depreciation, and interest.
Step 2: Make CT Adjustments
Several adjustments convert accounting profit to “Taxable Income”: Add back (non-deductible expenses): Entertainment expenses (50% disallowed), fines and penalties, distributions of profit (dividends are not deductible), and expenses related to exempt income. Deduct (additional CT deductions): Qualifying capital expenditure (specific rules apply), approved interest payments, and business losses from prior years (if applicable).
Step 3: Apply the Small Business Relief Threshold
If your Taxable Income is AED 375,000 or less: CT rate = 0% (Small Business Relief applies automatically for most businesses with revenue under AED 3 million). If your Taxable Income is above AED 375,000: the first AED 375,000 is taxed at 0%; the amount ABOVE AED 375,000 is taxed at 9%.
Example Calculation
A UAE mainland company with AED 2 million net profit: Taxable Income after adjustments: AED 1,800,000. 0% on first AED 375,000 = AED 0. 9% on AED 1,425,000 = AED 128,250. Total CT payable: AED 128,250.
Free Zone Qualifying Persons
A Qualifying Free Zone Person (QFZP) pays 0% CT on Qualifying Income. Only income from non-qualifying activities and income above the de minimis threshold is taxed at 9%. QFZPs must file a CT return even if tax due is AED 0.