In January 2022, the Ministry of Finance of the UAE announced: from 1 June 2023, the country will introduce a federal corporate tax (Corporate Tax, CT). For a country where for many years most companies operated without a profit tax, this is a significant turn.

The objectives of the reform are large-scale: to strengthen the UAE's position as a global business hub, accelerate the economy, and show the world that the country plays by transparent international rules.

For businesses, this means one thing — it's time to understand the new requirements, restructure processes, and learn to operate under a corporate tax. In this article, you will find a step-by-step guide: how to prepare, who needs to pay, what benefits exist, and how to avoid mistakes.

1. How to prepare a company for corporate tax: checklist for 2025

Study the law and rates

The main rules are enshrined in Federal Decree-Law No. 47 of 2022 with amendments No. 60 of 2023.
The rates are as follows:

• 0% — on taxable income up to 375,000 AED.

• 9% — on income exceeding 375,000 AED.

For large multinational companies subject to the OECD BEPS project (Pillar Two), the rate may be different — it is yet to be confirmed.

Register with FTA

Registration with the Federal Tax Authority (FTA) is mandatory for all companies and entrepreneurs with a license, even if you have a rate of 0% or qualify for Small Business Relief.

Registration is done online through the EmaraTax portal. The time frame depends on the date of establishment of the company. For example, if a business opens after 1 March 2024, registration must be completed within 3 months from the date of incorporation or by the end of the first financial year — whichever comes first.

A late fee of 10,000 AED applies. And this is not just a formality: without a TRN, you will not be able to submit declarations and claim benefits.

Set up accounting

Accounting is the foundation of a company's tax life.
You need to:

• keep records and store documents for at least 7 years;

• calculate tax based on net profit under IFRS;

• have a complete set of documents: from charter documents and reporting to confirmations of all income, expenses, and banking operations.

The quality of accounting determines whether you can apply for benefits, such as QFZP status. Errors or missing documents carry a penalty of 1,000 AED and above.

QFZP— Qualifying Free Zone Person — a qualified resident of a free economic zone entitled to a 0% rate for certain income if conditions are met

Determine the tax year and deadlines

The corporate tax declaration must be submitted, and the tax paid within 9 months after the end of the financial year.

Examples:

• Year ending 31.12.2024 — deadline 30.09.2025.

• Year ending 31.03.2025 — deadline 31.12.2025.

• Year ending 30.06.2025 — deadline 31.03.2026.

A late submission of the declaration incurs a penalty of 500 AED for each month, and a late payment incurs interest.

Check eligibility for benefits

Small Business Relief — for resident companies with income up to 3 million AED for the current and previous tax periods. It is effective until the end of 2026. It is not automatically applied: you must apply for the benefit through EmaraTax.

There are also other relaxations — for example, exemption from tax on dividends and capital gains while holding qualifying stock packages.

Brief checklist for preparation for 2025

The brief checklist is convenient to go through to quickly check if everything is completed.

• Register with EmaraTax and obtain TRN.

• Check financial statements and make corrections.

• Keep records of income and expenses monthly.

• Check eligibility for Small Business Relief and submit an application.

• Gather a complete package of documents.

• Determine the end date of the financial year and deadline for the declaration.

• Make a preliminary tax calculation.

• Submit the declaration and pay tax on time.

• Keep the declaration and documents for 7 years.

• In the case of complex transactions — involve a consultant or auditor.

Errors in taxes are among the most frequent and costly

The article's author — Irina Ryzhakova, a tax agent registered in the UAE, will help assess risks, set up accounting, and avoid penalties.

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2. Who pays corporate tax in the UAE, and who is exempt?

All business participants and individuals in the UAE, from the perspective of corporate tax, are divided into three categories: those who are required to pay tax; those who are exempt; and companies in free economic zones with special tax regimes (QFZP).

Who is considered a taxpayer?

Corporate tax is paid by:

• all companies registered in the UAE (mainland and free zone);

• foreign companies managed from the UAE;

• foreign companies with a permanent establishment in the UAE;

• foreign companies with income sourced in the UAE;

• individuals with licensed commercial activity and income exceeding 1 million AED per year.

Who is exempt?

The following are exempt from tax:

• government authorities;

• fully state-owned companies with specific types of activities;

• companies working with natural resources (taxes are paid at the emirate level);

• registered charitable organizations;

• qualified investment and pension funds;

• companies wholly owned by exempt persons.

Personal income from work, deposit interest, investments, and rental income is not taxed — unless it is not a licensed commercial activity.

QFZP regime

QFZP— Qualifying Free Zone Person — a qualified resident of a free economic zone entitled to a 0% rate for certain income when conditions are met

Companies in free economic zones can pay 0% on “qualified income” when the following conditions are met:

• sufficient presence in the free zone (staff, office, expenses);

• conducting allowed types of activities;

• not opting for the standard 9% rate;

• compliance with transfer pricing rules;

• having audited financial statements.

The de minimis rule allows QFZP to have a certain proportion of non-qualified income without losing the right to the 0% rate for qualified income. The requirement is considered fulfilled if the non-qualified income for the tax period does not exceed the lesser of two amounts:
— 5% of the total income of QFZP for the same period, or
— 5 million AED.

When calculating, the following are taken into account:

• The total income of the company (excluding certain income, for example, from permanent establishments outside the UAE or from property in free zones that is not commercial).

• The amount of non-qualified income (from excluded activities, transactions with mainland companies if it is not “qualified activity,” etc.).

• Comparison of the amount of non-qualified income with both thresholds — 5% and 5 million AED.

If conditions are violated, you will lose QFZP status for 5 years, and all income will be taxed at 9%.

3. Errors in submitting corporate declarations in the UAE: analysis through examples

The implementation of the new tax system is inevitably associated with the risk of errors, especially in the first year of operation under the new rules. Understanding common errors and their consequences helps to avoid penalties and unnecessary costs.

Untimely registration for corporate tax purposes

Description. Companies and entrepreneurs with a license must register with the FTA, obtain a TRN, and submit declarations. Many delay registration, believing that they can qualify for 0% or a benefit — this is a mistake.
Example. “Alpha Technologies” started operating on 1 July 2024 but submitted an application for registration only on 15 November 2024. The three-month period (if applicable based on the date of incorporation and financial year) was violated.
Consequences. A fine of 10,000 AED and difficulties with subsequent reporting.
Solution. Monitor applicable registration deadlines and apply in advance through EmaraTax.

Inaccurate accounting and document retention

Description. Typical issues: mixing personal and corporate expenses, lack of primary documents, violating record retention periods (minimum of 7 years).
Example. The owner of “Beta Trading” paid personal expenses from the corporate account and lost receipts for cash expenses. The accountant could not confirm part of the deductions.
Consequences. Increased taxable base, reassessments and fines (from 1,000 AED), increased scrutiny from the FTA.
Solution. Separate finances, establish document flow, use accounting software, and maintain a complete archive of primary documents.

Errors in classifying income and expenses (critical for QFZP)

Description. Incorrectly classified income (qualified/non-qualified) or expense (deductible/non-deductible) can break the de minimis threshold for QFZP.
Example. “Gamma Consulting” (QFZP) classified income from service to a mainland company as qualified without checking the type of activity. As a result, the proportion of non-qualified income exceeded the de minimis threshold.
Consequences. Loss of QFZP status and a 9% rate on all income for 5 years.
Solution. Verify criteria for qualified income and excluded types of activity, document justification, and consult if in doubt.

Incorrect application of deductions and benefits

Description. Only expenses related to the business are eligible, and limitations (for example, on representation) are ignored, while benefits are not claimed.
Example. “Delta Services” deducted the director's personal vacation as representation and did not claim Small Business Relief, although they were entitled to it.
Consequences. Denial of deductions, tax reassessment, penalties and fines; loss of savings due to unclaimed benefits.
Solution. Cross-reference expenses with the list of allowable deductions, assess eligibility for benefits in advance, and timely submit all necessary applications and documents to obtain them.

Missed deadlines for declaration submission and tax payment

Description. There are 9 months after the end of the financial year to submit the declaration and pay the tax.
Example. “Epsilon Logistics” has a financial year ending on 31.12.2024. The deadline is 30.09.2025. The declaration was submitted on 15.11.2025.
Consequences. A fine of 500 AED for each full or partial month of delay and penalties for late payment.
Solution. Maintain a tax calendar, set reminders, and start preparation in advance.

Incorrect calculation of the taxable base and tax amount

Description. Errors in arithmetic and in applying thresholds/rates (for example, 9% on the entire sum instead of the part exceeding 375,000 AED).
Example. “Zeta Retail” had taxable income of 400,000 AED and applied 9% to the entire amount, forgetting that the first 375,000 AED are taxed at a rate of 0%.
Consequences. Overpayment or, conversely, reassessment, penalties and fines.
Solution. Use current examples from the FTA, double-check calculations, and for complex cases — get an external specialist's review.

Ignoring transfer pricing rules (TPR)

Description. Transactions with related parties without substantiating the arm’s length principle, lack of documentation. TPR requirements apply not only to MNEs but also to SMEs.
Example. “Eta Holding” issued a loan to “Theta Operations” at a below-market interest rate without market substantiation and without TPR files.
Consequences. Adjustment of the base to market levels, reassessments, penalties and fines for lack/incompleteness of documentation.
Solution. Identify related parties, check market conditions, prepare and maintain documentation (SMEs must, at a minimum, conduct basic analysis and documentation of such transactions).

It is important: errors often lead to a chain reaction. Poor accounting leads to misclassification of expenses, further leading to calculation errors and delays. Work systematically: accounting → classification → calculation → deadlines.

Key mistakes and penalties regarding corporate tax in the UAE

Note: penalty amounts may be specified in legislation and FTA materials; the table is for informational purposes only.

The introduction of corporate tax in the UAE requires companies to register in a timely manner, maintain accurate accounting, understand tax status, and comply with reporting deadlines. Constant monitoring of legislative changes and, if necessary, consulting qualified advisers will help avoid errors and penalties and optimize the tax burden legally.