UAE Corporate tax: How the 9% income tax is calculated (with example)

Starting from June 2023, the UAE introduced a 9% corporate income tax on business profits — a major change in a region long known for its tax-free environment.

But how exactly is this tax calculated? And what happens if you earn less than the threshold?

Let’s break it down — with a simple example — so you can stay compliant and confident with help from a trusted accounting office in Dubai.

📊 Basic corporate tax structure in the UAE

Here’s how the corporate tax system works:

0% tax on net annual profit up to AED 375,000
9% tax on profits exceeding AED 375,000

This threshold is designed to support small businesses and startups, while ensuring larger firms contribute fairly to the economy.

🧮 How is the 9% applied?

The 9% tax is not applied to your entire profit, only to the amount that exceeds AED 375,000.

✅ Example:

Let’s say your business earns a net profit of AED 700,000 in a year.

Calculation:

First AED 375,000 → tax-free
Remaining AED 325,000 → taxed at 9%

Tax payable:
AED 325,000 × 9% = AED 29,250

So your total tax liability is AED 29,250, not 9% of the full AED 700,000.

📌 Key points to remember

The AED 375,000 threshold applies per legal entity, not per shareholder.
Losses can sometimes be carried forward to reduce future taxable income.
Freelancers and Free Zone companies may have different rules depending on activity and location.
Proper bookkeeping and accounting in Emirates standards are essential for tax accuracy and audit readiness.

💼 Get professional support

Navigating the new corporate tax rules can be complex, especially if you’re unfamiliar with financial reporting or UAE tax law. At Qualira Accounting, a reliable accounting office in Dubai, we help you:

Accurately calculate your taxable income
Maximize legal deductions
Stay compliant with FTA reporting
Understand how the tax applies to your specific business model

📩 Ready to simplify your tax planning?
Reach out to Qualira Accounting for clear advice and expert support tailored to your UAE business.

Your Team

Qualira Accounting Office in Emirates
info@qualira.ae

Accounting services in Dubai