How to Calculate Corporate Taxable Income in UAE: Step-by-Step Guide

Published: April 2026 | Reading time: 5 minutes

Quick Answer

Taxable income = Accounting net profit minus exempt income minus allowable deductions minus tax loss relief. The first AED 375,000 is taxed at 0% and anything above at 9%.

Step 1: Start with Accounting Net Profit

Your accounting net profit is the profit shown in your financial statements prepared under IFRS or other accepted accounting standards.

Step 2: Add Back Non-Deductible Expenses

Certain expenses are NOT deductible for tax purposes:

Dividends paid to shareholders
Owner withdrawals (sole proprietorships)
Fines and penalties (including FTA penalties)
Donations to non-qualifying entities
50% of entertainment expenses
Interest on loans from related parties exceeding prescribed limits

Step 3: Subtract Exempt Income

Some income is exempt from corporate tax:

Dividends from qualifying shareholdings
Capital gains from qualifying shareholdings
Qualifying income of Free Zone persons
Income from government entities

Step 4: Subtract Allowable Deductions

You can deduct legitimate business expenses including:

Employee salaries and benefits
Rent and utilities
Marketing and advertising costs
Professional fees (legal, accounting, consulting)
Depreciation on assets (following tax rules)
Interest expenses (subject to limitations)

Step 5: Apply Tax Loss Relief

If you had losses in previous years, you can carry them forward and deduct them from current year profits. Losses can be carried forward indefinitely but cannot offset more than 75% of taxable income.

Step 6: Apply the AED 375,000 0% Band

Once you have your final taxable income figure:

First AED 375,000 → 0% tax
Amount above AED 375,000 → 9% tax

Example Calculation

Item	Amount (AED)
Accounting Net Profit	1,000,000
Add: Non-deductible expenses	+ 50,000
Less: Exempt income	- 100,000
Less: Allowable deductions	- 150,000
Taxable Income	800,000
Tax on first AED 375,000	0% = AED 0
Tax on remaining AED 425,000	9% = AED 38,250
Total Corporate Tax Payable	AED 38,250

Common Mistakes to Avoid

❌ Forgetting to add back non-deductible expenses
❌ Claiming personal expenses as business deductions
❌ Not maintaining proper documentation
❌ Missing the 75% loss utilization limit

Back to Corporate Tax Services →

Frequently Asked Questions

What is the corporate tax rate on AED 1,000,000 profit?

First AED 375,000 = 0% tax (AED 0). Remaining AED 625,000 at 9% = AED 56,250 total tax.

Can I deduct owner salary in a sole proprietorship?

No. Owner drawings are not deductible for tax purposes. Only salaries paid to employees are deductible.

How long can I carry forward tax losses?

Indefinitely, but you cannot offset more than 75% of your taxable income in any single year.

Need Help Calculating Your Corporate Tax?

Contact AcontPro for professional tax calculation and filing assistance.

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