Key takeaways
- Taxable income starts from accounting profit: add back non-deductible items, such as half of entertainment and all fines, then deduct exempt income.
- Losses brought forward can reduce taxable income by no more than 75% in any period.
- A mainland company pays 0% on the first AED 375,000 and 9% above it; a QFZP pays 0% on qualifying income and 9% on the rest, with no AED 375,000 band.
- Small Business Relief removes the tax but not the return: you still register, file and keep records.
To calculate UAE corporate tax correctly, the 9% rate is the least of the problems. The judgement sits in the steps before it: which expenses are added back, how much of a brought-forward loss can be used, and which rate applies to which stream of income. An error at any of those points either overstates the liability or understates it, and an understatement surfaces later as a correction with penalties attached. For a finance director signing off the computation, those steps deserve the same scrutiny as the audit.
The four examples below are worked line by line under the rules for FY2025 returns (due by 30 September 2026 for calendar-year businesses) and FY2026. Our corporate tax calculator runs the same arithmetic on your own figures.
How to calculate corporate tax in six steps
- Accounting profit. Start with net profit before tax from the financial statements.
- Add back what is not deductible. This includes half of entertainment expenditure (Federal Decree-Law No. 47 of 2022, Art. 32), fines and penalties, net interest above the higher of AED 12 million and 30% of EBITDA (Art. 30), and payments to connected persons above market value (Art. 36). Adjustments to bring related-party prices to arm's length, the price independent parties would agree, belong here too (Art. 34).
- Deduct exempt income, such as dividends and gains that meet the participation exemption (Art. 23).
- Use losses brought forward, up to 75% of taxable income (Art. 37).
- Apply the rates. 0% on taxable income up to AED 375,000 and 9% above it (Art. 3; Cabinet Decision No. 116 of 2022). A Qualifying Free Zone Person (QFZP) pays 0% on qualifying income and 9% on everything else.
- Deduct credits in a fixed order: withholding tax credit, then foreign tax credit, then incentive credits such as the R&D credit for tax periods from 1 January 2026. The balance is paid in cash (Art. 44, as replaced by Federal Decree-Law No. 28 of 2025).
The return and the payment are both due within nine months of the end of the tax period (Arts. 48 and 53).
Example A: a mainland trading company
A mainland trading company reports accounting profit of AED 1,200,000. Its accounts include AED 60,000 of entertainment and AED 15,000 of fines. It has no exempt income and no losses.
| Line | AED |
|---|---|
| Accounting profit | 1,200,000 |
| Add: entertainment not deductible (50% × 60,000) | 30,000 |
| Add: fines | 15,000 |
| Less: exempt income | 0 |
| Taxable income | 1,245,000 |
| 0% on the first 375,000 | 0 |
| 9% on the remaining 870,000 | 78,300 |
| Corporate tax payable | 78,300 |
The two add-backs cost AED 4,050 of tax (9% × AED 45,000). Overall, the tax is about 6.5% of accounting profit, because the first AED 375,000 is taxed at 0%.
Example B: the same company with AED 400,000 of losses
Now give the same company AED 400,000 of tax losses brought forward from earlier periods.
| Line | AED |
|---|---|
| Taxable income before losses | 1,245,000 |
| Maximum loss relief (75% × 1,245,000) | 933,750 |
| Losses brought forward | 400,000 |
| Losses used (the lower of the two) | 400,000 |
| Taxable income | 845,000 |
| 0% on the first 375,000 | 0 |
| 9% on the remaining 470,000 | 42,300 |
| Corporate tax payable | 42,300 |
| Losses carried forward | 0 |
The losses reduce the tax by AED 36,000 (9% × AED 400,000). The 75% cap does not bite here, but it would with AED 1,000,000 of losses. The company could then use only AED 933,750, leaving taxable income of AED 311,250. That falls inside the 0% band, so the tax would be nil, and AED 66,250 of loss would carry forward.
A useful rule of thumb follows. For a business with the full AED 375,000 band, the cap only leaves tax to pay once taxable income before losses passes AED 1.5 million, because the 25% that remains in charge has to exceed AED 375,000 first.
Losses come with conditions that matter most after an acquisition or a shareholder change. They must arise in a corporate tax period, so pre-regime losses do not count, and they cannot be carried back. At least 50% of the ownership must be held continuously, or the same or a similar business must continue after a larger change of ownership (Art. 39; listed companies are exempt from this test). Losses from a period in which Small Business Relief was elected cannot be carried forward at all.
Example C: a Qualifying Free Zone Person
A free zone company meets every QFZP condition. Its taxable income is AED 900,000, of which 90% (AED 810,000) is qualifying income. Its revenue is AED 20 million, of which AED 500,000 is non-qualifying. That sits inside its de minimis limit, the most non-qualifying revenue a QFZP can earn and keep its status: the lower of 5% of revenue (AED 1 million) and AED 5 million.
| Line | Income (AED) | Rate | Tax (AED) |
|---|---|---|---|
| Qualifying income | 810,000 | 0% | 0 |
| Non-qualifying income | 90,000 | 9% | 8,100 |
| Total | 900,000 | 8,100 |
A QFZP receives no AED 375,000 band (Art. 3(2)). If it did, the AED 90,000 would be tax-free.
Two points stand out. The de minimis test is measured on revenue, not income: non-qualifying income here is 10% of taxable income, while non-qualifying revenue is only 2.5% of revenue. And the stakes are asymmetric. If the company failed any condition, its whole AED 900,000 would be taxed at the standard rates, AED 47,250 (9% of the AED 525,000 above the band), and it would remain outside the regime for the next four tax periods as well. The free zone checker tests the conditions.
Example D: Small Business Relief
A resident company has revenue of AED 2.4 million in FY2025, and its revenue has never exceeded AED 3 million. It is not a QFZP or part of a multinational group with consolidated revenue of AED 3.15 billion or more. Its taxable income is AED 600,000, and it elects Small Business Relief (SBR).
| Line | Without SBR (AED) | With SBR (AED) |
|---|---|---|
| Revenue | 2,400,000 | 2,400,000 |
| Taxable income | 600,000 | Treated as nil |
| 0% on the first 375,000 | 0 | Not applicable |
| 9% on the remaining 225,000 | 20,250 | Not applicable |
| Corporate tax payable | 20,250 | 0 |
| Return due within nine months | Yes | Yes (simplified) |
SBR applies to tax periods ending on or before 31 December 2029 (Ministerial Decision No. 131 of 2026), provided revenue stays at or below AED 3 million in the period and in every earlier one. Electing does not take a business out of the system. It still registers, files a simplified return by the nine-month deadline and keeps records, and a late return still costs AED 500 a month or part month. In a loss year the election needs thought, because losses from an SBR period cannot be carried forward. See Small Business Relief.
Where computations go wrong
- Adding back all entertainment, or none of it. Half is deductible.
- Applying the AED 375,000 band to a QFZP's non-qualifying income.
- Using losses above the 75% cap, losses from before corporate tax, or losses from an SBR year.
- Assuming that Small Business Relief means no return.
- Overlooking the payment. The tax is due with the return, within nine months of the period end.
How ebs can help
ebs Chartered Accountants is an FTA Registered Tax Agency (TAN 30022834), and our chartered accountants have Big Four audit-firm experience. We prepare the computation from your financial statements, document each adjustment so that it can be defended on review, and file the return on EmaraTax, the Federal Tax Authority's online portal. See corporate tax return filing or book a free first consultation.
This article is general information as at 8 September 2026, not advice on your specific circumstances. Tax rules change; check the current position before acting.