Most small agency owners in the UAE learned about corporate tax the same way: a message from an accountant saying they needed to register, followed by a reasonable question about why, if the agency would probably owe nothing. The answer is that corporate tax is a compliance regime first and a bill second.
What follows is a plain summary of the parts that matter to a small agency. It is general information, not tax advice. Rules and deadlines change, and your own position depends on your licence, your clients and your accounts, so check it with a registered tax agent before you rely on any of it.
The rate, and what it applies to
Corporate tax applies to UAE businesses for financial years starting on or after 1 June 2023. For a mainland company the structure is simple: 0% on taxable income up to AED 375,000, and 9% on taxable income above that. The bands apply to taxable income, which is your accounting profit adjusted under the tax rules, not to revenue.
As an example, an agency with taxable income of AED 500,000 would pay nothing on the first AED 375,000 and 9% on the remaining AED 125,000, which is AED 11,250. The same agency with taxable income of AED 300,000 would owe nothing at all, but would still have to register and file.
Corporate tax is separate from VAT. The two have their own registrations and their own returns, and being registered for one does not register you for the other.
Registration comes first, whatever you owe
Every business subject to corporate tax has to register with the Federal Tax Authority, including free zone companies and including those that expect to pay nothing. For a UAE company incorporated on or after 1 March 2024, the deadline is three months from the date of incorporation. Earlier companies had deadlines during 2024, so if yours has not registered, fix that first.
Once registered, the return and any tax due are both due within nine months of the end of your tax period. Your tax period normally follows your financial year, which is why the choice of financial year end, made casually at setup, turns out to set your filing calendar for good.
Small business relief, and when it ends
Small business relief is the provision most small agencies will actually use. A resident business that elects it is treated as having no taxable income for that tax period, so no corporate tax is payable, and it files a simplified return.
- Revenue must be AED 3 million or less in the tax period, and in every previous tax period. Cross the line once and the relief is no longer available, even if revenue falls back later.
- The test is revenue, not profit. A busy agency on thin margins can pass AED 3 million long before it makes much money.
- It is elected for each tax period. It does not happen automatically.
- Qualifying free zone persons cannot use it, and neither can members of large multinational groups.
- Splitting one business into several to stay under the threshold is treated as an arrangement to obtain a tax advantage, and the anti-abuse rules apply.
The relief originally covered tax periods ending on or before 31 December 2026. In August 2026 the Ministry of Finance extended it, through Ministerial Decision No. 131 of 2026, to tax periods ending on or before 31 December 2029. The AED 3 million threshold did not change.
One trade-off is worth raising with your tax agent. Losses from tax periods where you do not elect the relief can be carried forward, but a year in which you do elect it is treated as having no taxable income at all. In a loss-making year, electing the relief may not be the obvious choice it looks like.
Keep records as if someone will ask
Records have to be kept for at least seven years after the end of the tax period they relate to. That applies to businesses using small business relief too, because the FTA needs to be able to check that revenue really was under the threshold.
The core records are a record of transactions in the period, a record of assets including purchases and disposals, a record of liabilities, and a record of shares held at the end of the period. For an agency, that means invoices, credit notes, bills, contracts and bank statements that agree with each other.
The businesses that find corporate tax painful are rarely the ones that owe the most. They are the ones that cannot show, quickly, what they earned and why.
The free zone assumption that catches agencies
Many agencies chose a free zone partly because they heard free zone companies pay 0% corporate tax. That is true for a qualifying free zone person, but only on qualifying income, and only while it meets every condition.
- It must keep adequate substance in the free zone.
- It must derive qualifying income, and must not have elected to be taxed at the standard rates.
- It must follow the arm's length principle with related parties and keep transfer pricing documentation.
- It must keep audited financial statements, whatever the size of its revenue.
- Its non-qualifying revenue must not exceed AED 5 million or 5% of total revenue, whichever is lower.
Qualifying income comes mainly from transactions with other free zone persons, or from a defined list of qualifying activities such as manufacturing, logistics and fund management. Creative and marketing services are not on that list. So a free zone agency whose clients are mostly mainland brands may find most of its revenue is non-qualifying, which can breach the de minimis limit.
The consequences are significant. A qualifying free zone person does not get the AED 375,000 band at 0%, so non-qualifying taxable income is taxed at 9% from the first dirham. It cannot use small business relief. And a business that fails a condition loses qualifying status for that tax period and the four after it. If you are in a free zone and assuming a 0% rate, confirm it with a tax agent against your actual client list.
What to do this quarter
Check that you are registered and note your filing deadline. Work out your revenue for each period since your first, because the small business relief test looks backwards. If you are in a free zone, ask whether you are a qualifying free zone person at all. And make sure your invoicing produces a clean, numbered register that matches the bank, because every other part of this depends on it.
Wiro keeps invoices, credit notes and payments against each client, in sequence, which gives your accountant a clean record to work from. It does not file tax returns. That remains the job of your accountant or a registered tax agent.
