UAE Corporate Tax Changes 2026: Key CT Updates for UAE Businesses
UAE corporate tax changes 2026: Small Business Relief sunset (31 Dec 2026), QFZP guidance updates, CT late payment penalty rate, e-invoicing for CT, and.
Small Business Relief sunset — action required
- What is happening: Small Business Relief (SBR) allows UAE businesses with revenue at or below AED 3 million to treat their taxable income as zero — effectively paying 0% CT regardless of profit. SBR was always a temporary measure.
- The sunset: SBR is only available for tax periods ending on or before 31 December 2026. For a company with a 31 December year-end: the last eligible period is 1 January 2026 to 31 December 2026. For a company with a 31 March year-end: the last eligible period is 1 April 2025 to 31 March 2026 (ends before 31 December 2026). The following period will be subject to the standard 9% CT rate.
- What to do now: Businesses currently relying on SBR should model their CT liability for the first post-SBR period. If profit exceeds AED 375,000, CT will apply at 9%. Consider timing of income recognition, expense acceleration, and structuring decisions before SBR expires.
QFZP guidance developments
- Qualifying activities clarified: The FTA has issued additional guidance on which activities qualify for the 0% Qualifying Free Zone Person rate. Manufacturing for export, software development for overseas customers, and fund management for non-UAE investors are confirmed as qualifying. UAE mainland client-facing activities (professional services to UAE mainland companies, retail sales to UAE consumers) are not qualifying and are taxable at 9%.
- De minimis rule: QFZP entities can derive a limited amount of non-qualifying income without losing their QFZP status — the de minimis threshold is 5% of total revenue or AED 5 million (whichever is lower). Exceeding this threshold causes ALL income (not just the excess) to be taxed at 9% for that period.
- Substance requirements: The FTA is increasing scrutiny of QFZP substance claims — headcount, payroll costs, and management decision-making in the free zone must be proportionate to the scale of qualifying income. Free zone entities claiming 0% CT should document their substance position annually.
Transfer pricing and CbCR developments
- Country-by-Country Reporting (CbCR): UAE-headquartered multinational groups with consolidated annual revenue above AED 3.15 billion (approximately USD 860 million) must file Country-by-Country Reports with the FTA within 12 months of their financial year-end. The first CbCR filing obligations arose for FY2024.
- Master File and Local File: Groups with UAE entity revenue above AED 200 million must maintain transfer pricing documentation (Master File + Local File). The FTA can request this documentation during an audit — failure to provide it on request attracts a specific administrative penalty.
- Pillar Two (BEPS): UAE has enacted Pillar Two rules (15% global minimum tax) for large MNE groups (revenue ≥ EUR 750 million). UAE-headquartered groups meeting this threshold are subject to UAE’s Domestic Minimum Top-up Tax from FY2025. This does not affect UAE SMEs.
UAE CT compliance review for 2026
We review your CT position for SBR sunset, QFZP status, and transfer pricing — before the FTA does. Fixed fee.
See CT servicesFrequently asked questions
What happens to my business after Small Business Relief ends in UAE?
After the SBR sunset (for tax periods ending after 31 December 2026), your business will be subject to the standard UAE CT rate: 0% on the first AED 375,000 of taxable income; 9% on taxable income above AED 375,000. If your business profit is, say, AED 500,000 per year, your annual CT bill will be (500,000 − 375,000) × 9% = AED 11,250. This is the first time many UAE SMEs will pay any corporate tax — budget for it in your financial planning now.
Has the UAE corporate tax rate changed in 2026?
No — the UAE CT rate remains 0% (on first AED 375,000) and 9% (above AED 375,000) in 2026. The Qualifying Free Zone Person rate remains 0% on qualifying income. UAE has not announced any change to the headline CT rate. The 2026 changes are structural: SBR sunset, e-invoicing requirements, and QFZP guidance — not the rate itself.
What is the UAE Pillar Two minimum tax and does it affect my business?
The OECD BEPS Pillar Two global minimum tax (15%) affects only very large multinational enterprises with annual consolidated revenue above EUR 750 million (approximately AED 3 billion). The vast majority of UAE businesses — including most large UAE conglomerates — are below this threshold. If your group revenue is below EUR 750 million, Pillar Two does not apply to you. UAE-headquartered groups above the threshold should seek specialist advice as the rules are complex.
When do I need to file my UAE CT return for the 2024 financial year?
For a 31 December 2024 financial year-end: the CT return is due by 30 September 2025 (9 months after year-end). For a 30 June 2024 year-end: the return was due 31 March 2025. Late filing attracts AED 500/month for the first 12 months, then AED 1,000/month. If you have not yet filed for your first CT period, file as soon as possible — the longer the delay, the higher the penalty accumulates.
Official UAE Government Sources