How UAE Corporate Tax Is Calculated: Revenue, Profit and Taxable Income

Last reviewed: 26 July 2026

The UAE Corporate Tax calculation does not begin with the company’s revenue and it is not simply 9% of the accounting profit. The calculation normally starts with the accounting profit or loss shown in the financial statements and then applies the adjustments required by the Corporate Tax legislation.

This guide explains that process in practical terms. For the broader framework, start with the UAE Corporate Tax Guide 2026.

The Quick Answer

• The first AED 375,000 of taxable income is generally subject to 0%.
• The portion exceeding AED 375,000 is generally subject to 9%.
• The AED 375,000 threshold relates to taxable income, not sales or revenue.
• A company with high revenue can have low taxable income, while a company with lower revenue can still have taxable income.
• Bookkeeping and financial statements must be completed before a reliable tax calculation can be prepared.
• Free Zone Persons may be subject to a different calculation for Qualifying Income and non-Qualifying Income.

The Calculation in Five Steps

1. Prepare the financial statements using the applicable accounting standards and accounting basis.
2. Identify the accounting profit or loss for the Tax Period.
3. Apply the adjustments required under the Corporate Tax legislation to determine taxable income.
4. Apply the applicable Corporate Tax rates.
5. Deduct available withholding-tax and foreign-tax credits to determine Corporate Tax payable.

Revenue, Accounting Profit and Taxable Income Are Different

Revenue

Revenue is the gross amount of income earned during the Tax Period before deducting expenses. Revenue is relevant to several Corporate Tax tests, including Small Business Relief and certain accounting and assurance requirements, but it is not the amount to which the ordinary 0% and 9% rates are directly applied.

Accounting profit or loss

Accounting profit or loss is the result shown in the financial statements after recognising revenue and expenses under the applicable accounting standards. It is the normal starting point for determining taxable income.

Taxable income

Taxable income is the accounting profit or loss after the adjustments required by the Corporate Tax Law. These adjustments can increase or reduce the amount reported in the accounts.

Step 1: Prepare Reliable Financial Statements

The Corporate Tax calculation depends on the financial statements for the relevant Tax Period. Incomplete bookkeeping, unreconciled bank accounts, missing invoices or incorrectly classified owner transactions can produce an unreliable tax result.

For the underlying documents and assurance requirements, read our detailed guide to Corporate Tax records and audited financial statements.

Which accounting standards apply?

Taxable Persons generally prepare financial statements using International Financial Reporting Standards. A Taxable Person with revenue not exceeding AED 50 million may use IFRS for SMEs, provided the applicable requirements are met.

Accrual or cash basis?

The accrual basis is the normal accounting basis. A Taxable Person whose revenue does not exceed AED 3 million may use the cash basis, subject to the applicable rules. Once revenue exceeds AED 3 million, financial statements generally must be prepared on the accrual basis unless the FTA approves an exceptional treatment.

Does every company require audited financial statements?

Not every company requires assurance solely for Corporate Tax purposes. For Tax Periods beginning on or after 1 January 2025, audited financial statements are required for a Taxable Person that is not a Tax Group and has revenue exceeding AED 50 million, and for every Qualifying Free Zone Person. Other assurance requirements may arise under company law, a licence, a regulator, financing arrangements or contractual terms.

Step 2: Identify Accounting Income

Accounting income is the net accounting profit or loss for the Tax Period shown in the financial statements. The Corporate Tax computation should start from that figure rather than from revenue, gross profit, cash collected or the bank balance.

The Tax Period generally follows the financial year used by the business. A mismatch between the accounting period and the registered Tax Period should be corrected before the return is prepared.

Step 3: Apply the Corporate Tax Adjustments

The accounting result is adjusted for items whose tax treatment differs from their accounting treatment. The exact adjustments depend on the business and its transactions. The following are common categories.

Exempt income

Certain income may be excluded from taxable income when the legal conditions are met. Examples can include dividends and other profit distributions received from a UAE resident juridical person, income qualifying for the Participation Exemption, and income of a foreign Permanent Establishment where the relevant election and conditions apply.

An accounting entry should not be removed from taxable income merely because it is described as a dividend, investment gain or foreign income. The exemption conditions must be tested.

Deductible business expenditure

An expense is generally deductible where it is incurred wholly and exclusively for the purposes of the Taxable Person’s business and is not capital in nature. Where an expense has both business and non-business purposes, only the identifiable business portion and an appropriate proportion of any common component may be deductible.

Capital expenditure is not normally deducted immediately merely because the company paid cash for it. Its tax effect generally follows the accounting treatment through depreciation or amortisation, subject to the Corporate Tax rules and any specific adjustment.

Common non-deductible or restricted items

• Personal expenses and amounts not incurred for the business.
• Donations, grants or gifts made to a person that is not a Qualifying Public Benefit Entity.
• Fines and financial penalties imposed for breaching laws or regulations. Compensation paid for damages is not automatically treated as a penalty and requires a separate review.
• Corporate Tax imposed under the UAE Corporate Tax Law.
• Recoverable input VAT recorded as an expense.
• Dividends, profit distributions and similar withdrawals by an owner.
• Expenditure that does not meet the arm’s-length or Connected Person requirements, to the extent an adjustment is required.

Entertainment expenditure

Only 50% of qualifying entertainment expenditure incurred for customers, shareholders, suppliers or other business partners is generally deductible. This can include meals, accommodation, transportation, admission fees and facilities used for entertainment. Employee-related expenditure that is incurred for a genuine business purpose may require a different analysis.

Related Parties and Connected Persons

Transactions with Related Parties must follow the arm’s-length principle. Payments or benefits to Connected Persons must also satisfy the relevant market-value and business-purpose requirements. The accounting amount may therefore require adjustment where it differs from an arm’s-length amount or where the legal conditions are not met.

Interest expenditure

Net Interest Expenditure can be restricted under the general interest-deduction limitation and certain specific rules. The general rule broadly limits deductible Net Interest Expenditure to the higher of the prescribed fixed amount or 30% of adjusted EBITDA, subject to exemptions and detailed conditions. Businesses with material financing, shareholder loans or acquisition debt should calculate this separately rather than treating all finance costs as automatically deductible.

Tax Loss Relief

A qualifying Tax Loss may be carried forward and used against taxable income in a later Tax Period, subject to the statutory conditions. The amount used is generally limited to 75% of the taxable income of the later period.

Loss-making businesses should read our detailed guide to UAE Corporate Tax Losses and carry-forward rules before making elections or filing the return.

Small Business Relief

An eligible Resident Person may elect for Small Business Relief for a qualifying Tax Period. Where the election is validly made, the person is treated as having no taxable income for that period. However, the election can affect the ability to carry forward a Tax Loss or Net Interest Expenditure arising in that period.

The revenue threshold, excluded persons and consequences are explained in our UAE Small Business Relief guide.

Free Zone income

A Qualifying Free Zone Person applies 0% to Qualifying Income and 9% to taxable income that is not Qualifying Income. Expenses must be allocated appropriately between those components. The ordinary AED 375,000 0% band does not apply to the non-Qualifying Income component of a Qualifying Free Zone Person.

See the detailed guide to UAE Corporate Tax for Free Zone companies before applying the 0% Free Zone rate.

Step 4: Apply the Corporate Tax Rates

For an ordinary Taxable Person, the standard rates are:

The AED 375,000 threshold applies once to the Taxable Person for the Tax Period. It is not applied separately to each branch, business line, licence or project of the same Taxable Person.

Step 5: Deduct Available Tax Credits

Withholding Tax Credit

The current UAE withholding-tax rate for the categories presently specified is 0%. If withholding tax is imposed in the future or applies under a relevant provision, the available credit would be considered in accordance with the law.

Foreign Tax Credit

Foreign tax paid on foreign-source income included in UAE taxable income may be available as a Foreign Tax Credit. The credit is limited to the lower of the foreign tax actually paid and the UAE Corporate Tax attributable to the relevant foreign-source income.

Unused Foreign Tax Credit cannot be carried forward, carried back or refunded. Evidence of the foreign tax and the income to which it relates should be retained.

Worked Example: From Accounting Profit to Corporate Tax

The following simplified example illustrates the calculation. It is not a substitute for reviewing the facts and all applicable provisions.

In this example, the company’s revenue is not used as the tax base. The calculation begins with accounting profit, applies the relevant adjustments and then applies the rates to taxable income.

What Information Is Needed for the Calculation?

• Final trial balance and financial statements for the Tax Period.
• General ledger and reconciliations.
• Breakdowns of entertainment, donations, fines, owner transactions and capital expenditure.
• Schedules of interest income and expenditure.
• Related Party and Connected Person transactions.
• Details of dividends, disposals of investments and foreign income.
• Tax Loss schedules from earlier periods.
• Evidence supporting elections, exemptions and reliefs.
• Foreign-tax certificates and payment evidence, where a credit is claimed.

Common Calculation Mistakes

• Applying 9% directly to revenue or accounting profit.
• Treating the AED 375,000 threshold as a revenue threshold.
• Deducting all client entertainment instead of applying the 50% restriction.
• Leaving regulatory fines and non-business expenses in the deduction calculation.
• Claiming an exemption without testing its conditions.
• Ignoring Related Party and Connected Person adjustments.
• Failing to separate capital expenditure from operating expenditure.
• Claiming recoverable VAT as a Corporate Tax deduction.
• Using a Tax Loss without checking the 75% limitation and continuity conditions.
• Electing for Small Business Relief without considering the loss and interest consequences.
• Applying the ordinary rates to a Free Zone company without assessing its Qualifying Free Zone Person status.

Corporate Tax Calculation Checklist

1. Confirm the correct Taxable Person and Tax Period.
2. Complete the bookkeeping and all account reconciliations.
3. Prepare the financial statements under the applicable accounting standards.
4. Start with the accounting profit or loss before tax.
5. Identify exempt income and other tax reductions.
6. Review deductible, restricted and non-deductible expenses.
7. Review interest, Related Party and Connected Person transactions.
8. Calculate available Tax Loss Relief.
9. Assess Small Business Relief and any other elections.
10. Separate Qualifying and non-Qualifying income for a relevant Free Zone Person.
11. Apply the correct tax rates.
12. Calculate and document available tax credits.
13. Reconcile the final calculation to the Corporate Tax Return.

Frequently Asked Questions

Does a company pay Corporate Tax when revenue exceeds AED 375,000?

Not merely because revenue exceeded AED 375,000. The threshold applies to taxable income after the required adjustments.

Is Corporate Tax always 9% of accounting profit?

No. Accounting profit is the starting point. Exempt income, non-deductible expenditure, reliefs, Tax Losses and other adjustments can change taxable income.

Can a company deduct all business meals?

Not necessarily. Entertainment expenditure for customers and other business partners is generally subject to the 50% restriction. The facts must be reviewed to distinguish entertainment from other employee or business expenditure.

Can a company deduct a government fine?

A fine or financial penalty imposed for breaching a law or regulation is not deductible. Contractual compensation or damages may require a different analysis.

Can unused Foreign Tax Credit be carried forward?

No. Unused Foreign Tax Credit cannot be carried forward, carried back or refunded.

Where is the calculation reported?

The calculation supports the figures reported in the Corporate Tax Return. See our guide to filing and paying a UAE Corporate Tax Return.

Where can I find shorter answers?

Visit the UAE Corporate Tax FAQs for concise answers and links to the relevant detailed guides.

Related Guides

For the overall framework: UAE Corporate Tax Guide 2026

For the filing process: filing and paying a UAE Corporate Tax Return

For losses: UAE Corporate Tax Losses and carry-forward rules

For relief: UAE Small Business Relief guide

For Free Zone treatment: UAE Corporate Tax for Free Zone companies

For supporting records: Corporate Tax records and audited financial statements

Need Help Preparing the Corporate Tax Calculation?

MAIC can assist with completing and reviewing accounting records, preparing the accounting-to-tax reconciliation, assessing deductions and reliefs, calculating taxable income and preparing the Corporate Tax Return.

The review should be based on the company’s actual transactions, legal structure, Tax Period and supporting documentation.