UAE companies are not zero-tax by default. Corporate tax is generally 0% up to AED 375,000 taxable income and 9% above; free-zone 0% needs QFZP conditions. VAT is separate. Register and file even at 0%. Not tax advice—confirm with FTA or a licensed advisor.
The old “Dubai is tax-free” shorthand misleads founders more than the rates themselves. What trips people up is compliance: registration, returns, and free-zone conditions that are not automatic with a licence. This page is orientation for new companies — especially international and China-linked founders — not a substitute for the Federal Tax Authority or a licensed tax advisor.
Chinese twin: 阿联酋企业所得税与 VAT.
This article is general information for founders. It is not tax, legal, or accounting advice. Rates, thresholds, registration timelines, Qualifying Free Zone Person conditions, penalties, and reliefs change. Confirm current rules with the Federal Tax Authority, Ministry of Finance publications, and a licensed tax advisor.
Is the UAE still a “zero-tax” place for companies?
Short answer: no — not in the way many marketing decks still imply.
The UAE remains a comparatively low-tax place to operate, but:
- Corporate tax applies under the federal Corporate Tax Law framework (standard rates below).
- VAT (standard rate 5% on most taxable supplies) has been in force for years.
- Free-zone “0%” is conditional (Qualifying Free Zone Person / qualifying income) — not a sticker that comes with every free-zone licence.
- Large multinational groups may face additional rules (Pillar Two / top-up frameworks) — out of scope for a simple new-company overview; get specialist advice if that might apply.
Holding an outdated “zero tax” mental model is riskier than reading the published bands.
How does UAE corporate tax work for a new company?
Under the standard corporate tax framing published by UAE authorities (Ministry of Finance / FTA / u.ae):
| Taxable income (standard regime) | Corporate tax rate (general framing) |
|---|---|
| Portion up to AED 375,000 | 0% |
| Portion above AED 375,000 | 9% on the excess |
Important distinctions founders miss:
- The AED 375,000 figure here is about taxable income for corporate tax — not the same test as VAT turnover (even though the number matches the VAT mandatory threshold).
- Free-zone entities that meet Qualifying Free Zone Person rules may apply 0% to qualifying income under separate conditions — see below. That is not the same as “every free-zone company pays nothing.”
- Rules, reliefs, and elections change. Always re-check tax.gov.ae and current MoF guidance before you budget or file.
This page does not calculate your tax bill, classify your income, or elect reliefs for you.
Do I still need to register and file if I expect to pay 0%?
Usually, yes — treat registration and filing as compliance duties, not as “only if I owe cash.”
In practice, many new companies discover too late that:
- Being in the 0% band on taxable income (or expecting QFZP 0% on qualifying income) does not mean “skip the tax system.”
- Registration with the FTA (typically via EmaraTax) and returns are separate from how much tax you ultimately pay.
- Free-zone companies that expect 0% still commonly need to register and later file — QFZP status is assessed against conditions and income categories, not granted as a permanent exemption from the portal.
Deadlines for corporate tax registration are set by FTA decisions and depend on when the entity was established / licensed. Do not rely on a blog’s memory of “three months” without checking the current FTA decision text for your facts. Start at FTA corporate tax registration and confirm with a licensed advisor.
Late registration and late filing can attract penalties. Exact amounts and any waiver mechanisms are published by the FTA/Cabinet decisions and can change — verify on tax.gov.ae; this page will not invent a penalty sticker as a Lexoford quote.
How does VAT registration work for a new company?
VAT is a separate federal tax from corporate tax. Per the FTA’s published VAT registration guidance:
| Position | When it applies (FTA thresholds) | What it means in practice |
|---|---|---|
| Mandatory registration | Taxable supplies and imports exceed AED 375,000 over the previous 12 months, or you expect them to exceed that in the next 30 days | You must register; charge VAT where required; file returns; keep records |
| Voluntary registration | Taxable supplies and imports or taxable expenses exceed AED 187,500 (prior 12 months or expected next 30 days), without meeting mandatory criteria | You may register — useful for input VAT / B2B customers, but it creates ongoing filing duties |
| No registration (yet) | Below the relevant thresholds and no strong commercial reason to register early | Monitor monthly; keep evidence for the decision |
Standard VAT rate: 5% on most taxable supplies. Some supplies may be zero-rated or exempt — classification is fact-specific; do not assume “export = ignore VAT paperwork.”
Founder caution on voluntary registration: registering early can help recover input VAT and satisfy customers who want tax invoices — but once registered, late or missing returns still create pain. If customers do not need VAT invoices and your scale is still small, voluntary registration is a systems decision, not a badge.
Official reference: FTA — Registration for VAT.
Are free-zone companies automatically tax-free?
No.
A free-zone licence does not automatically equal 0% corporate tax on everything you earn.
When people say “free zone 0%,” they usually mean a Qualifying Free Zone Person (QFZP) applying 0% to qualifying income — while other taxable income is generally taxed at 9%, and all of the following must typically hold (high-level; confirm current Cabinet/Ministerial decisions):
- You are a free-zone person (incorporated/registered in a UAE free zone).
- You maintain adequate substance in the free zone for core income-generating activities (people, assets, expenditure that match the business — not a hollow shelf).
- Income falls into qualifying categories under published rules.
- You meet de minimis limits on non-qualifying revenue (exact caps are in published decisions — check FTA/MoF; do not treat a blog number as permanent law).
- You comply with transfer pricing / arm’s-length rules where they apply.
- You prepare audited financial statements as required for QFZP status under current decisions.
- You have not elected into the standard regime in a way that disqualifies the preference.
Failing conditions can cost the preference for multiple tax periods under the published frameworks. That is why “we hung a free-zone plaque” is not a tax strategy.
Structure choice still starts with customers and activity — see Mainland vs free zone and How to choose a Dubai free zone (we do not crown a “best free zone for tax”).
Corporate tax vs VAT — what is the difference?
| Dimension | Corporate tax | VAT |
|---|---|---|
| What it taxes | Taxable income of the company (profit-style base after rules) | Taxable supplies / imports (consumption tax) |
| Famous AED 375,000 figure | Income band for 0% vs 9% (standard regime) | Mandatory registration threshold for supplies + imports |
| Typical rate framing | 0% / 9% (standard); QFZP 0% on qualifying income | 5% standard; zero-rated / exempt categories exist |
| Registration | Corporate tax registration / TRN via EmaraTax | VAT registration / TRN via EmaraTax (separate process) |
| Returns | Corporate tax return (period rules) | Usually quarterly (some monthly) — confirm your profile |
Same AED number, different tests. Mixing them up is one of the most common founder mistakes.
What should China-linked and other international founders watch?
This is orientation, not China or UAE tax advice:
- CRS (Common Reporting Standard) — The UAE and China both participate in automatic exchange of financial account information in applicable cases. Do not assume a UAE bank account is invisible to home-country reporting.
- Controlled foreign company (CFC) / home-country anti-deferral rules — If you are a tax resident of China (or another jurisdiction) controlling a UAE company, home rules may still reach certain profits. Confirm with a licensed advisor in both places.
- Tax treaties — A China–UAE double tax agreement exists; using it usually requires proving tax residency and meeting treaty conditions. Paper residency without real presence is a weak story.
- Personal tax residency ≠ company structure — Where you are tax resident and where the company is incorporated are separate questions. Plan both.
- Banking KYC — Banks decide independently. Strong substance and clean paperwork help; Lexoford does not guarantee account opening (why accounts get rejected, how to open a corporate account).
Old “offshore shell + invoice hopping” habits age badly under modern KYC and information exchange.
What happens after the licence is issued?
A practical post-licence tax orientation (not a DIY filing manual):
- Map your taxes — Will you need corporate tax registration now? Are you approaching VAT thresholds?
- EmaraTax access — Ensure an authorised person can access FTA digital services; keep licence and UBO details consistent with required documents.
- Books before thresholds — Clean bookkeeping makes VAT and corporate tax filings less painful; year-two cost shape sits in annual maintenance cost.
- Calendar — Licence renewal, visa renewals, VAT periods, and corporate tax periods are different clocks. See setup timeline for formation stages; tax calendars follow FTA rules.
- When facts are complex — Multi-emirate activity, related parties, IP, designated-zone distribution, or mainland + free-zone mixes → engage a licensed tax advisor early.
Lexoford’s accounting & tax coordination page describes how we help operationally; it is not a substitute for licensed tax advice.
How Lexoford helps
- Coordinates company formation and post-setup admin paths for international founders (EN / ZH / AR / Hindi).
- Can help you sequence tax registration conversations and introduce licensed accounting/tax professionals when needed.
- Splits Lexoford service fees — AED 4,999 / 5,999 / 9,999 — from free-zone / government / immigration fees at cost. Those bands are not “all-in tax packages.”
- Not a law firm and not a tax firm. We do not guarantee FTA approvals, tax positions, refunds, QFZP outcomes, bank accounts, or visas.
- Trade Licence 2651822.01 · Office 607, RAG Tower, Al Barsha 1, Dubai · reply within 1 working day · WeChat Lexoford.
Fee context: Dubai company setup cost · cost calculator.
Next step — what to send for a tax-compliance orientation call
Send (no promise of a tax position):
- Licence type (mainland / which free zone) and main activities
- Expected customers (UAE mainland / free zone / export) and rough first-year turnover
- Whether books already exist and who will file
- Home-country tax residency of shareholders (high-level)
Company formation · Accounting & tax · Contact
Also useful: UAE corporate legal checklist (live at site root).
FAQ
Does a free-zone company automatically pay 0% corporate tax?
No. A free-zone licence is not automatic 0%. Preferential 0% generally applies only if you meet Qualifying Free Zone Person conditions and only to qualifying income. Other taxable income is typically taxed at the standard rate. Confirm current decisions on tax.gov.ae with a licensed advisor.
If my taxable income is under AED 375,000, do I still need to register for corporate tax?
Often yes for companies. The 0% band on taxable income (standard regime) is about how much tax you calculate, not a free pass from registration and filing. Timelines depend on FTA rules for your entity. Check EmaraTax / FTA guidance for your incorporation date and facts.
When must a new UAE company register for VAT?
When taxable supplies and imports exceed AED 375,000 over the prior 12 months, or when you expect to exceed that within the next 30 days (FTA mandatory rule). Voluntary registration may be available from AED 187,500 of taxable supplies/imports or taxable expenses. Confirm on the FTA VAT registration page.
Is VAT the same thing as corporate tax?
No. VAT is a tax on taxable supplies (and related rules); corporate tax is on taxable income. They have separate registrations, returns, and thresholds — even though both famously use an AED 375,000 figure for different tests.
Can Lexoford guarantee my tax treatment or filing outcome?
No. Lexoford coordinates setup and can introduce licensed professionals. The FTA and your licensed advisors determine registrations, positions, and assessments. We also do not guarantee bank or visa outcomes.
Are Lexoford's AED 4,999 / 5,999 / 9,999 packages tax registration packages?
No. Those amounts are Lexoford company-setup service fees (scope by package). Free-zone/government fees, FTA processes, and licensed tax/accounting advisor fees are separate. Confirm everything in writing before you pay.