UAE Corporate Tax hit its second year of operation in June 2026, with 2027 being the first full year post-honeymoon. Most of the structural features are now bedded in; the changes expected in 2027 are enforcement and documentation, not rate. Here's what UAE businesses, freelancers using Sole Establishments, and QFZP entities should plan for.
Small Business Relief extended through 2029
Confirmed by Ministerial Decision in 2026: businesses with revenue under AED 3 million continue to pay zero corporate tax through the 2027, 2028 and 2029 financial years. This is a major relief for UAE freelancers and solo founders who incorporate as a Sole Establishment or small LLC. The relief is elected annually on the tax return; nothing automatic. Three things to know:
- Revenue is counted across all your UAE entities combined if you control more than one.
- Natural persons (freelancers) earning under AED 1 million from business activity are outside the corporate tax regime entirely — no filing required.
- The 2030 question (will it be extended again?) is open; plan on the assumption that it will not.
QFZP (Qualifying Free Zone Person) tightens
Qualifying Free Zone Person status, which gives 0% corporate tax on qualifying income earned by a free zone entity, is the signature benefit of UAE free zones. 2026 saw the Federal Tax Authority publish detailed guidance on what counts as qualifying activity (narrow interpretation) and what substance requirements the entity must meet (real office, real employees, real decision-making in the UAE). 2027 is expected to be the first year of serious audit activity:
- Expect FTA audits on 100-200 large QFZP entities in 2027.
- Common disqualification: UAE free zone entity whose employees and decisions sit in India, Pakistan or the Philippines.
- Common disqualification: UAE free zone entity whose billing to onshore (mainland UAE) companies exceeds the 'de minimis' threshold.
If you set up a free zone entity for 0% CT and the operational reality is offshore, 2027 is when this becomes risky. Clean up now.
Transfer pricing documentation becomes universal
The AED 200M revenue threshold for mandatory transfer pricing documentation (Master File and Local File) was tightened through 2026. By mid-2027, most businesses above that threshold should expect to maintain full transfer pricing files, with:
- Benchmarking studies for all related-party transactions.
- Country-by-country reports where applicable.
- Annual review cycle, aligned with the corporate tax return filing deadline.
Smaller businesses still face transfer pricing scrutiny on related-party transactions but without the formal file requirement.
Freelancer and sole establishment stability
For UAE freelancers earning under AED 1 million per year through sole establishments or freelance permits, 2027 looks identical to 2026 — outside the corporate tax regime, outside VAT (unless registered voluntarily), subject only to the free zone or mainland license fee. This is the best stability story in the Gulf for freelancers right now.
Gratuity and end-of-service rules
No changes to end-of-service gratuity rules expected in 2027. The MoHRE calculation (21 days per year for the first 5 years, 30 days per year beyond that) remains the default; the DEWS fund alternative continues for freelance zones that adopted it. If you're an employer or an employee planning end-of-service, use the UAE Gratuity Calculator.
Tip: Model your UAE corporate tax exposure with the UAE Corporate Tax Calculator. Rates and the AED 3M Small Business Relief threshold update automatically as new Ministerial Decisions are issued.
What this means for 2027 planning
The UAE remains one of the most tax-advantaged jurisdictions for freelancers and small SaaS. 2027 planning for a UAE-based or UAE-incorporated business should assume:
- Zero corporate tax if under AED 3M revenue (Small Business Relief).
- 9% corporate tax above AED 375K taxable income, if not qualifying for relief.
- Zero on qualifying free zone income — but substance has to be real.
- 5% VAT unchanged.
- No personal income tax on salary or dividend from a UAE entity.
Questions people ask
- Does UAE Small Business Relief continue in 2027?
- Yes. Confirmed through the 2029 financial year by Ministerial Decision. Businesses under AED 3M revenue continue to pay zero corporate tax through 2027, 2028 and 2029.
- What's the UAE corporate tax rate in 2027?
- 9% on taxable income above AED 375,000. 0% on the first AED 375,000. Qualifying free zone income remains at 0%.
- Will QFZP status be harder to maintain in 2027?
- Yes. Expect active FTA audits on free zone substance requirements. If your entity's employees and decision-makers sit outside the UAE, QFZP status is at risk.
- Do UAE freelancers pay corporate tax?
- Freelancers earning under AED 1M from business activity are outside the corporate tax regime entirely. Above that, they're subject to the normal 9% rate above AED 375K unless Small Business Relief applies.
- Is UAE VAT changing in 2027?
- No. The 5% VAT rate and registration thresholds (mandatory above AED 375K revenue, voluntary above AED 187,500) remain unchanged.
Sources
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