Tax Planning in the UAE, and Why It Now Matters

That changed when Corporate Tax took effect for financial years starting on or after 1 June 2023. Planning now means choosing between elections that are made once, in the return, and cannot be undone.

What the tax actually costs

Article 3(1) of the Corporate Tax Law sets two rates. Taxable income up to AED 375,000 at 0%. Taxable income above that at 9%.

A company with AED 800,000 of taxable profit pays:

AED 375,000 at 0%   =        0
AED 425,000 at 9%   =   38,250

You get that 0% band once per tax period. A tax group gets one band between all its members, not one each.

The election that can cost you more than it saves

Small Business Relief treats you as having no taxable income. It applies where revenue does not exceed AED 3,000,000, under Article 21 of the Corporate Tax Law and Article 2(1) of Ministerial Decision No. 73 of 2023.

For the company above, it takes AED 38,250 to nil. Obvious, until you read Article 4 of the same decision.

Elect the relief in a period where you made a loss and that loss cannot be carried forward at all. Article 5 does the same to net interest expenditure.

In a loss year you had no tax to pay anyway. So you surrender a deduction against future profits and receive nothing for it. That is the most expensive planning error we see, and it is made by people trying to be efficient.

The threshold looks backwards

Once revenue exceeds AED 3,000,000 in any tax period, you cannot elect the relief again. Not that year, and not later if revenue falls.

The FTA guide gives the case directly. Revenue of AED 4,300,000 in the period ending 31 December 2025, then AED 1,900,000 in the period ending 31 December 2026. Not eligible in 2026. The earlier breach is permanent.

A one-off event counts. Selling a business asset counts toward revenue.

You must claim it in the return

The relief is optional and claimed by electing in the tax return. File without the election and it is gone for that period.

To elect you must already be registered and hold a TRN. Registration is not something to leave until filing week.

Free zone companies plan differently

A Qualifying Free Zone Person pays 0% on qualifying income and 9% on the rest.

It 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 out of Qualifying Free Zone Person status under Article 19(1), which opens those reliefs. Whether that helps depends on your income mix, and it is a calculation, not a preference.

What planning actually looks like

Three questions, answered before the year closes rather than after.

1. Where will revenue land against AED 3,000,000?
2. Do you hold losses worth protecting?
3. If you are in a free zone, is your income qualifying?

Answer those in month 10 and you have choices. Answer them in month 13 and you are documenting whatever happened.

What this does not cover

Transfer pricing, exempt income, the participation exemption and the interest deduction limitation rules all move the final number.

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

Where we fit

Our Corporate Tax service is at tax.calx-ae.com. Send your trial balance and we will tell you which elections are open to you.