One number defines UAE Corporate Tax more than any other: AED 375,000. It is the point where the rate changes. Taxable income up to AED 375,000 is taxed at nothing, and taxable income above it is taxed at nine percent. That rule comes straight from the law, and once you understand it, most of the confusion around Corporate Tax falls away. This guide explains what the number means in plain terms, where it comes from in the legislation, and the two mistakes businesses make around it.
Where the number comes from
The threshold is not a rule of thumb. It is written into the Corporate Tax Law itself. Article 3 of Federal Decree-Law No. 47 of 2022 on the Taxation of Corporations and Businesses sets two rates: zero percent on the portion of taxable income that does not exceed AED 375,000, and nine percent on the portion above it. Everything else about the threshold follows from that single article.
| Taxable income | Rate | Source |
|---|---|---|
| Up to AED 375,000 | 0% | Article 3(1)(a), FDL 47 of 2022 |
| The portion above AED 375,000 | 9% | Article 3(1)(b), FDL 47 of 2022 |
It is a band, not a cliff
The most important thing to understand is that crossing AED 375,000 does not tax everything you earned. Only the part above the line is taxed. The first AED 375,000 always stays at zero, no matter how much you make on top of it. So earning one dirham more than the threshold does not suddenly tax the whole amount; it taxes that one extra dirham at nine percent. The bars below show how the taxed share grows while the first slice stays free.
| Taxable income | Tax due (9% on the excess) | Share of income taxed |
|---|---|---|
| AED 375,000 | AED 0 | |
| AED 500,000 | AED 11,250 | |
| AED 750,000 | AED 33,750 | |
| AED 1,000,000 | AED 56,250 | |
| AED 2,000,000 | AED 146,250 |
Try the interactive calculator. Enter your taxable income and see the 0% and 9% portions split in real time, with the effective rate and the Small Business Relief position.
The first mistake: measuring against revenue
The most common error is to compare AED 375,000 against turnover. It is not measured against revenue. It is measured against taxable income, which is the figure you reach after taking your accounting profit and applying the deductions and adjustments the law allows. A business can have several million dirhams of revenue but, after its costs, a taxable income near or even below the threshold. Judging your position by revenue leads to the wrong conclusion, and usually to a nasty surprise or a missed opportunity.
| Revenue for the period |
| less allowable deductions and adjustments ↓ |
| Taxable income |
| compare to AED 375,000 ↓ |
| 0% up to the line, 9% above it |
The second mistake: confusing the threshold with Small Business Relief
Sitting close to the AED 375,000 threshold is a separate mechanism called Small Business Relief, and the two are easy to mix up because they do different jobs. Small Business Relief comes from Article 21 of the Corporate Tax Law and Ministerial Decision No. 73 of 2023. It lets a resident business whose revenue is AED 3,000,000 or less, in the current period and every earlier one, elect to be treated as having no taxable income at all, so it pays nothing for that period. It is available for tax periods ending on or before 31 December 2026.
Notice the difference. The AED 375,000 figure is an income threshold that sets the zero percent band of the rate. The AED 3,000,000 figure is a revenue threshold that decides whether you can claim a separate relief. They are different numbers doing different things, and confusing one for the other is a frequent and costly mistake.
| The AED 375,000 threshold | Small Business Relief | |
|---|---|---|
| The figure | AED 375,000 of taxable income | AED 3,000,000 of revenue |
| What it does | Sets the 0% band; 9% above it | Elect to be treated as having no taxable income |
| Measured on | Taxable income | Revenue |
| Where in law | Article 3, FDL 47 of 2022 | Article 21 and Ministerial Decision 73 of 2023 |
| Time limit | Ongoing | Periods ending on or before 31 Dec 2026 |
AED 375,000 is a threshold, not a cliff, and it is measured on taxable income, not revenue. Do not confuse it with the AED 3,000,000 revenue figure for Small Business Relief. They are different numbers in different articles of the law.
Filing still applies below the threshold
One last point that catches people out. Being below AED 375,000, or claiming Small Business Relief, means you owe no Corporate Tax. It does not mean you have nothing to do. A taxable person must still register for Corporate Tax and file a return, even when no tax is due. The obligation to register and file does not depend on owing tax, and the penalty for filing late applies regardless. Zero tax is not the same as zero obligation.
What to do about it
Work from taxable income, not revenue, when you think about the AED 375,000 threshold, and remember only the excess above it is taxed. Check separately whether Small Business Relief applies, using the AED 3,000,000 revenue test, and do not conflate the two figures. File even when your income sits below the line, because registration and filing are required regardless of whether tax is due. The number is simple once you see it for what the law makes it: the top of a zero percent band, not an on and off switch.
This article is general information and is not tax advice. It refers to Federal Decree-Law No. 47 of 2022 and Ministerial Decision No. 73 of 2023, which should be confirmed against their current official text. Rates, thresholds and reliefs depend on your circumstances. We would be glad to help you work out your position.