UAE Tax Incentives and Exemptions, What Is Real

Here is what exists.

The AED 375,000 band

Article 3(1) taxes the first AED 375,000 of taxable income at 0%, and the rest at 9%.

This is automatic. You do not elect for it. But you get it once per tax period, and a tax group gets one band between all members rather than one each.

Small Business Relief

Where revenue does not exceed AED 3,000,000, you can be treated as having no taxable income. Article 21 of the Corporate Tax Law, with Article 2(1) of Ministerial Decision No. 73 of 2023.

Four conditions people miss.

You must elect for it in the tax return. No election, no relief, and no second chance for that period.

You must be registered and hold a TRN before you can elect.

Non-resident persons cannot use it at all, whatever their revenue.

And Article 4 cancels the tax losses of any period in which you elect. Article 5 does the same to net interest expenditure. Electing in a loss year costs you a future deduction and saves you nothing.

The threshold also looks backwards. Once revenue passes AED 3,000,000 in any period, you cannot elect again even if revenue falls later.

Qualifying Free Zone Person status

A Qualifying Free Zone Person pays 0% on qualifying income and 9% on income that is not qualifying.

This is the relief most misunderstood in the UAE. Being in a free zone does not make you a Qualifying Free Zone Person, and being one is not automatically better.

A Qualifying Free Zone Person does not get the AED 375,000 band. It also cannot use Small Business Relief, tax grouping, qualifying group relief, business restructuring relief, or transfer of tax losses.

A free zone company can elect not to be treated as a Qualifying Free Zone Person under Article 19(1), which opens those reliefs up. Which route is better depends on how much of your income actually qualifies.

Transfer pricing documentation relief

Businesses that elect Small Business Relief are exempt from maintaining transfer pricing documentation for that period.

That is a genuine compliance saving, and it is one of the few reasons to elect in a year where the tax saving itself is small.

What is not an exemption

Two things get described as exemptions and are not.

Being below a VAT threshold is not an exemption. It means you are not required to register yet.

Having no profit is not an exemption. You still register, and you still file.

The pattern across all of them

Every relief above is conditional, and most conditions are procedural rather than economic. You lose them by not electing, not registering, or not filing on time, rather than by failing some commercial test.

That is good news, because procedural conditions are the ones you control.

What this does not cover

Exempt persons under Article 4, the participation exemption, foreign permanent establishment exemption and qualifying group relief each carry their own conditions and are not covered here.

This is general information on published law, not advice on your position.

If you want to know which apply to you

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