The United Arab Emirates (UAE) has long been known as a tax-friendly destination for businesses. For years, entrepreneurs and investors flocked to its shores — especially places like Dubai and Abu Dhabi — to enjoy minimal tax liabilities and generous business incentives. But with recent global shifts in taxation, rising government revenues, and new economic policies, has the UAE’s tax-free reputation changed in 2026?
Let’s break it down.
1. Corporate Tax in the UAE: What Changed?
Until recently, most businesses in the UAE operated without paying corporate tax, which was a major draw for foreign investors. However, in line with international tax standards and to diversify government revenue, the UAE introduced a federal Corporate Tax (CT) regime.
From June 1, 2023, the UAE began imposing a corporate tax on business profits — but at highly competitive rates compared to global standards.
Key Points:
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Businesses with taxable profits up to AED 375,000 pay 0% CT.
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Profits above AED 375,000 are taxed at 9%.
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Certain sectors like oil & gas and foreign banks have specific rules.
This CT framework continues into 2026, making the UAE no longer universally tax-free, but still one of the most attractive low-tax environments worldwide.
2. What is Still Tax-Free?
Despite the introduction of corporate tax, several areas remain tax-advantaged:
Personal income tax – Still 0% in 2026.
Capital gains tax – Generally exempt for most types of investments.
Dividend tax – No withholding tax on dividends paid to shareholders.
Free Zones – Many free zones still offer tax holidays or exemptions — especially for new businesses.
Example: Some Free Zones continue to grant 15–50 year corporate tax exemptions under specific conditions (e.g., economic substance requirements, real operations in the zone, etc.).
3. VAT (Value Added Tax)
The UAE also introduced Value Added Tax (VAT) at 5% in 2018, which is still in effect.
VAT applies to most goods and services — but many essentials and exports may be zero-rated or exempt.
So although the corporate landscape is leaner than before, total tax liability is no longer zero for many business types.
4. Why the UAE is Still a Top Choice in 2026
Even with corporate tax, the UAE remains extremely competitive — here’s why:
Low CT rate compared to global averages
0% personal income tax
No tax on capital gains or dividends in most cases
Strong double tax treaty network
Free zones with enhanced incentives
World-class infrastructure and business ecosystem
These factors keep the UAE at the top of global rankings for ease of doing business and foreign investment appeal.
5. Practical Tips for Entrepreneurs in 2026
Choose the right business structure: Mainland vs Free Zone vs Offshore.
Plan for corporate tax compliance early.
Leverage free zone incentives if eligible.
Understand the impact of VAT on your operations.
Conclusion — Is Business Setup Still Tax-Free in 2026?
Not completely — but still low-tax.
While the UAE has implemented corporate tax, the rates are among the lowest globally, and perks like 0% personal tax, free zone exemptions, and no tax on dividends/capital gains make it a strong choice for business setup.
In short: The UAE has transitioned from being tax-free to tax-efficient, keeping its competitive edge in 2026.
