Table of Contents
- Introduction: Why Corporate Tax Matters Now
- Standard Rates & Thresholds
- Free Zone Tax Incentives & Qualifying Conditions
- Mainland Tax Rules for SMEs
- Compliance Checklist for Business Owners
- Founder Tips for Smart Tax Planning
- Free Zone vs Mainland Comparison Table
- FAQs on UAE Corporate Tax for SMEs
- Conclusion & Next Steps
Introduction: Why Corporate Tax Matters Now
Corporate tax is now an integral part of the UAE’s pro-business landscape. Since 2023, SMEs and startups must align their financial records with the new 9 percent federal corporate tax (CT) framework.
For founders, the real question is simple – “What will I actually pay, and how do I stay compliant?”
This guide from Maju Management Consultancy explains the rules in plain English so you can plan with confidence and avoid penalties.
Standard Rates & Thresholds
The UAE applies a 9% corporate tax on taxable profits exceeding AED 375,000, after allowable deductions. Profits below this threshold are tax-exempt.
SMEs can qualify for a Small Business Relief (SBR) if their revenue is under the prescribed limit (set by the Ministry of Finance each year). Always confirm latest thresholds before filing.
Tip: Register early and maintain accurate accounts to avoid interest on delayed payments.
Free Zone Tax Incentives & Qualifying Conditions
Free zones remain a core attraction for entrepreneurs thanks to potential 0% tax on qualifying income. However, this benefit applies only to a Qualifying Free Zone Person (QFZP) who meets strict conditions under the Corporate Tax Law:
- Substance test – adequate staff, office space, and decision-making in the UAE
- Qualifying activities – such as distribution of goods to foreign markets, R&D, or shared services
- Non-qualifying income (from mainland clients or real-estate rentals) taxed at 9%
- Compliance with transfer pricing and related-party rules
Action Point: Map your transactions early to distinguish qualifying vs non-qualifying income. Seek a Corporate Tax Readiness Review
Mainland Tax Rules for SMEs
Mainland companies operate under the standard corporate tax framework:
- Rate: 9% on profits above AED 375,000
- Exemptions: Dividends and capital gains from qualifying shareholdings
- Record-keeping: Maintain audited financial statements and board resolutions
- Transfer Pricing: Inter-company transactions must be at arm’s length
Late filings and weak documentation can attract administrative penalties. MajuBiz can help you tidy books and establish proper entity structures for Business Setup in Dubai
Compliance Checklist for Business Owners
| Requirement | What to Do | Why It Matters |
|---|---|---|
| Tax Registration | Register on the MoF portal before due date | Mandatory for all liable entities |
| Accounting Records | Maintain books for minimum 7 years | Evidence for audits |
| Return Filing | Submit annual return within 9 months of financial year-end | Avoid penalties |
| Substance Evidence | Document staff, office lease, decision logs | Supports QFZP status |
| Related-Party Files | Prepare transfer-pricing reports | Ensures compliance & audit readiness |
Founder Tips for Smart Tax Planning
- Align revenue recognition with contract terms and invoice dates.
- Avoid mixing free zone and mainland income in the same books.
- Track inter-company charges with arm’s-length pricing.
- Reconcile bank statements monthly to match invoices.
- Engage a licensed tax consultant for annual review.
MajuBiz experts offer hands-on support —from registration and VAT filing to corporate tax advisory and entity structuring across UAE mainland and free zones.
Free Zone vs Mainland Tax Comparison
| Factor | Free Zone (Qualifying) | Mainland Company |
|---|---|---|
| Headline Rate | 0% on qualifying income | 9% on taxable profits |
| Key Condition | Substance + activity tests | General rules apply |
| Common Pitfalls | Mixing non-qualifying income without tracking | Weak records, late filings |
| Action Step | Assess transactions & substance | Maintain clean books |
FAQs
1. Do all free zone companies get 0 percent corporate tax?
2. What records must SMEs keep?
3.How should groups with both Mainland and Free Zone entities plan tax?
4. Is there any small-business relief available?
5. Can a business switch from Free Zone to Mainland later?
Conclusion
Corporate tax in the UAE does not erase its pro-business edge – it encourages transparency and strategic growth. For SMEs, compliance starts with clarity.
Whether you operate from a free zone or the mainland, MajuBiz helps you stay ready – from registration to return filing and strategic tax planning.
