UAE Professional Services Corporate Tax 2026: CT for Consultants, Law Firms, and Advisers
UAE professional services corporate tax guide 2026: 9% CT on consulting, legal, accounting, and advisory firms — partner drawings deductibility.
UAE corporate tax for professional services firms
- All professional services are fully taxable: Consulting, legal, accounting, engineering, architecture, and advisory services — there is no exemption or reduced rate. All profits above AED 375,000 are taxed at 9%.
- Small Business Relief (to 31 Dec 2029): Professional services firms with revenue below AED 3 million per tax period can elect Small Business Relief — treating taxable income as zero for CT purposes. Ministerial Decision No. 131 of 2026 (issued 7 August 2026) extended the relief to tax periods ending on or before 31 December 2029. Plan ahead: for periods ending after that date, the normal 9% rate applies even for small firms.
- Free zone professional firms: Professional services firms in UAE free zones (DIFC, ADGM) are subject to 9% CT unless they qualify as a Qualifying Free Zone Person (QFZP). QFZP status requires qualifying income, adequate substance, and ring-fencing from UAE mainland clients. Law firms and advisory firms with UAE mainland clients typically do NOT qualify for 0% QFZP treatment on that income.
Key CT deductions for professional services
- Salaries and owner drawings: Salaries paid to employees (including owner-managers who are on payroll) are deductible if they are commercially reasonable. Owner distributions of profit (dividends from the UAE entity) are not deductible — only the salary component is. Owner-managed professional firms should structure remuneration carefully to separate deductible salary from non-deductible profit share.
- Client entertainment: UAE CT restricts entertainment and client hospitality deductions to 50% of qualifying costs. Entertainment includes client dinners, golf days, event tickets, and gifts above a de minimis level. Professional firms with significant business development spend should track entertainment separately for CT purposes.
- Professional indemnity insurance: Premiums paid for professional indemnity (PI) insurance are deductible — they are a genuine business cost. The 5% VAT on PI premiums is recoverable as input VAT (if the firm is VAT-registered with taxable services).
- Bad debts: Specific bad debt provisions (debts written off) are deductible for CT. General provisions (e.g., 5% of all trade debtors) are not deductible under UAE CT — only specific identified bad debts qualify.
Intercompany fees and transfer pricing
- Management fees between group entities: If a UAE professional services firm is part of a group and pays or receives management fees, these must be at arm’s length — the amount a third party would charge. Excessive or below-market fees between related parties are adjusted by the FTA.
- OECD transfer pricing documentation: Professional services firms in groups with annual revenue above AED 200 million must maintain a Master File and Local File under UAE transfer pricing rules. Smaller firms still need to be able to demonstrate arm’s length pricing on request.
- Partner firm structures: International professional services firms operating as partnerships or LLPs with a UAE presence — the CT treatment of the UAE entity depends on how profits flow between the UAE office and the partnership. Seek specific advice on cross-border profit allocation.
UAE consulting or professional services firm with CT questions?
We advise professional services firms on UAE CT compliance — owner remuneration, entertainment caps, and intercompany fee structuring. Fixed fee.
See CT servicesFrequently asked questions
Is a UAE freelancer or sole consultant subject to corporate tax?
It depends on the legal structure. If you operate as a UAE LLC or free zone company — yes, 9% CT applies to profits above AED 375,000 (or zero if you qualify for and elect Small Business Relief, available for tax periods ending on or before 31 December 2029). If you operate as an individual natural person providing professional services directly (not through a company), UAE CT applies to business income if it exceeds AED 1 million per year. Natural person sole traders below AED 1 million annual business income are not subject to CT.
Can a UAE law firm in DIFC claim the 0% CT rate?
DIFC-based law firms are subject to 9% UAE CT on their worldwide income — DIFC’s own 0% tax regime has been replaced by UAE CT. DIFC provides a transitional period for existing companies. To access the 0% Qualifying Free Zone Person rate under UAE CT, the law firm must meet all QFZP conditions — including that qualifying income must be from qualifying activities. Providing legal services to UAE mainland clients is not a qualifying activity under current guidance. DIFC law firms serving UAE mainland clients will pay 9% CT on that income.
Are partner drawings deductible for UAE corporate tax?
Only the salary component is deductible. If a partner in a UAE consulting firm is on the payroll and receives a market-rate salary, that salary is deductible for CT. The profit share (dividend) distributed to the partner above their salary is not deductible — it is a distribution of post-tax profit. Owner-managed firms should set salaries at commercially justifiable levels to maximise deductible remuneration before distributing the remaining profits as dividends (which are not deductible but are exempt from income tax in the hands of the recipient).
What CT records must a UAE professional services firm keep?
UAE CT requires records to be kept for a minimum of 7 years after the end of the relevant tax period. For professional services firms, key records include: client contracts and fee agreements (proving the nature and quantum of revenue); payroll records and salary agreements (supporting salary deductions); entertainment expense records (amount, date, business purpose, attendees — for the 50% deduction cap); intercompany fee agreements and transfer pricing documentation (if applicable); and working papers supporting the CT return calculations.
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Official UAE Government Sources