Decoding UAE’s corporate tax for small business success

At Smart Zone, we’re often approached by entrepreneurs seeking clarity on the UAE’s new corporate tax framework, says Kartik Sangar, Managing Partner, Smart Zone Tax & Accounting.

Business set-up and corporate tax compliance are closely interlinked. Since the introduction of corporate tax in 2023, it has become critical for businesses to not only set up correctly but also to meet tax regulations from day one.

Let’s break down the numbers that matter. The UAE has thoughtfully structured its corporate tax with a 0 per cent rate for taxable income up to Dh375,000 – a significant relief for micro-businesses and start-ups. Beyond this threshold, SMEs face a competitive 9 per cent rate on taxable income, positioning the UAE among the world’s most business-friendly tax environments.

The compliance journey requires attention to detail but isn’t overwhelming. Businesses must register for corporate tax through the Federal Tax Authority (FTA) portal, maintain audited financial statements, and file annual returns within nine months of their financial year-end. Quarterly provisional returns might be required for larger businesses, but most SMEs will follow an annual filing cycle.

What’s particularly encouraging is the range of deductibles available. Businesses can claim legitimate operating expenses including staff costs, marketing expenses, rent, and even certain capital expenditures. Free zone companies meeting regulatory requirements can continue enjoying tax incentives, while specific sectors may qualify for additional exemptions.

“At Smart Zone, we take immense pride in our legacy of helping over 30,000 businesses successfully set up in the UAE over the past 14 years. With our deep expertise and in-depth understanding of the local market, we’ve been a trusted partner for entrepreneurs and companies from around the world. Our comprehensive services cover everything from business set-up in free zones and mainland to tailored solutions for legal, financial, and operational needs. As we continue to evolve with the dynamic business landscape, our commitment to providing seamless, efficient, and personalised services remains unwavering,” says Sangar.