Compute Tax Returns under Corporate Tax UAE

Key takeaways

• Taxable income starts from your accounting profit, not raw revenue, then gets adjusted for specific add backs and exemptions the law sets out
• The first AED 375,000 of taxable income is taxed at 0%. Only the amount above that is taxed at 9%
• Your financial statements must follow IFRS, though smaller businesses can use simpler methods: cash basis if revenue is AED 3 million or less, IFRS for SMEs if revenue is AED 50 million or less
• Audited financial statements are required only if standalone revenue exceeds AED 50 million, you are a Qualifying Free Zone Person regardless of revenue, or you are part of a tax group, following Ministerial Decision No. 84 of 2025
• The tax return itself covers more than the final number. It includes transfer pricing disclosures, elections made in your first tax period, and transitional adjustments

Filing a corporate tax return is not just plugging revenue into a formula. It means starting from your accounting profit, applying a specific set of adjustments the Corporate Tax Law requires, and then working out what actually gets taxed. This guide walks through how that calculation works, which deductions genuinely apply, and what the return itself needs to contain.

How taxable income is actually worked out

Taxable income is not your revenue, and it is not simply your accounting profit either. It starts with the net profit shown in your financial statements, prepared under IFRS or an approved simplified standard, and then gets adjusted.

Some adjustments add income back in, such as expenses the law does not allow you to deduct. Others remove income, such as amounts that qualify for an exemption. What is left after these adjustments is your taxable income, and that is the figure the tax rate actually applies to.

Once you have taxable income, the rate itself is simple. The first AED 375,000 is taxed at 0%. Anything above that is taxed at 9%. This is not an exemption on a category of income. It is a rate band that applies to every taxable person, so a company with AED 500,000 in taxable income pays 9% only on the AED 125,000 above the threshold, not on the full amount.

A worked example

Here is a straightforward calculation for a business with no unusual adjustments.

Revenue of AED 1,000,000 minus allowable expenses of AED 400,000 leaves an accounting profit of AED 600,000. The first AED 375,000 of that is taxed at 0%. The remaining AED 225,000 is taxed at 9%, giving a tax bill of AED 20,250.

Most real filings are not this clean, since accounting profit almost never equals taxable income without adjustment. Here is a more typical example for the same business, assuming it spent AED 60,000 entertaining clients and paid a AED 5,000 fine during the year.

The fine is added back in full since penalties are never deductible. Only half the entertainment expense is added back, since the other half was already disallowed correctly in the accounts. The result is a taxable income that is higher than the accounting profit, and a tax bill AED 3,150 higher than the simple version above. This is the kind of gap that catches businesses that file based on accounting profit alone.

Which accounting method you can use

Your financial statements need to follow IFRS by default, but the rules scale down for smaller businesses.

• Revenue of AED 3 million or less: you may elect the cash basis, recording income and expenses when cash actually moves rather than when they are earned or incurred
• Revenue of AED 50 million or less: you may use IFRS for SMEs, a simplified version of IFRS with lighter disclosure requirements
• Revenue above AED 50 million: full IFRS applies

The method you use affects how your books look, not the underlying rules for what counts as taxable income. A business on the cash basis still has to apply the same add backs and exemptions as one using full IFRS.

Do your financial statements need to be audited

Not every business needs an audit, but three categories do, under Ministerial Decision No. 84 of 2025, which replaced the earlier Ministerial Decision No. 82 of 2023 for tax periods starting on or after 1 January 2025:

• A standalone taxable person, meaning one not part of a tax group, with revenue exceeding AED 50 million in the relevant tax period
• Any Qualifying Free Zone Person, regardless of revenue, since audited financials are a condition of the 0% rate on qualifying income
• Every tax group, which must now prepare audited special purpose aggregated financial statements, a requirement that used to depend on the group’s combined revenue and now applies regardless of size

If none of these apply to you, you still need to keep proper accounting records for at least seven years, even without a formal audit.

Deductions and exemptions that actually apply

An expense is deductible if it was incurred wholly and for the purposes of the business. Within that general rule, a few specific categories work differently from what many businesses assume:

• Entertainment costs for clients, suppliers, or other outside parties are only 50% deductible. Entertainment for your own staff, such as a team lunch or year end party, is fully deductible
• Interest expense is deductible up to the higher of AED 12 million or 30% of tax adjusted EBITDA. Businesses with net interest expense under AED 12 million in a tax period are unaffected regardless of the 30% test
• Fines and penalties of any kind, including tax penalties themselves, are never deductible
• Dividends and profit distributions are never deductible, since they are a distribution of profit rather than a cost of earning it
• Donations are only deductible if made to an approved Qualifying Public Benefit Entity
• Capital expenditure, such as equipment or property, is not deducted as a one off expense. It is depreciated over its useful life instead

Dividends and capital gains you receive are sometimes described as a blanket exemption, but that is not accurate. They are only exempt where your shareholding meets the participation exemption conditions, including a minimum ownership stake or acquisition cost, a holding period, and a minimum tax rate on the company you hold shares in. Outside those conditions, the income is taxed normally.

What your corporate tax return actually contains

The return is not just a single tax figure. Following the FTA’s official return guidance, it includes:

• Financial statement data, audited or unaudited depending on which threshold applies to you, broken down to reflect revenue, expenses, and assets under IFRS
• Transfer pricing disclosures, where you have transactions with related parties or connected persons
• Elections made during the tax period, including the realisation basis election for unrealised gains and losses, transfers within a qualifying group, and business restructuring relief. Several of these elections are made in your first tax period and cannot be reversed later, so they need deciding before filing rather than after
• Tax residency documentation and evidence supporting any foreign tax credit claimed
• Information on permanent establishments outside the UAE and any associated revenue or losses

All of this is submitted and validated through EmaraTax, not just the final tax calculation.

Steps to file your return

1. Close out your financial statements for the tax period, using the accounting method that applies to your revenue level
2. Work out your taxable income by applying the required add backs and exemptions to your accounting profit
3. Confirm which elections apply to you, particularly if this is your first tax period, since some cannot be changed later
4. Gather supporting documentation: transfer pricing files where relevant, tax residency evidence, and records supporting any exemption you are claiming
5. Submit the return through EmaraTax and pay any tax due within nine months of the end of your tax period

Before you file

• Confirm which accounting method and audit requirement actually apply to your revenue level, rather than assuming
• Check every add back category against your actual expenses, not just the obvious ones like fines
• Decide on any available elections before your first return is due, since several cannot be reversed afterward
• Keep documentation for any exemption you are claiming, particularly dividends or capital gains under the participation exemption
• Reconcile your financial statements against your tax calculation before submission, not after

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