Since the introduction of UAE Corporate Tax (Federal Decree-Law No. 47 of 2022), SMEs have been navigating a complex, evolving tax landscape. However, misinformation and common myths can lead to costly mistakes, missed deadlines, and unexpected penalties.
At Kuvera, we work closely with SMEs across the UAE, and Middle East to demystify tax obligations and simplify compliance using smart, tech-enabled solutions. Here are the top 5 tax myths debunked, with practical advice for what to do instead.
MYTH 1: We’re a small business, so corporate tax doesn’t apply to us.
Reality: Corporate tax applies to all businesses once their taxable income exceeds AED 375,000 (Article 3). This threshold applies irrespective of the entity’s size or structure.
However, there is relief available. Under Article 21: Small Business Relief, a Resident Person whose revenue does not exceed AED 3 million in a relevant tax period may elect to be treated as having no taxable income for that period.
What to do: Calculate your taxable income carefully. If you meet or exceed the threshold, corporate tax registration is mandatory. Assess whether you qualify for Small Business Relief and make a timely choice when filing your return.
MYTH 2: We can register anytime there’s no rush.
Reality: The UAE’s Federal Tax Authority (FTA) has specific registration deadlines based on license issuance dates. Late registration can result in fines of AED 10,000 or more.
What to do: Check your corporate license issue date and register before your FTA deadline within 90 days of a new business set up. Don’t wait until the last minute.
MYTH 3: Once registered, compliance is done
Reality: Registration is only the beginning. SMEs must file returns (Article 53), maintain accounting records and financials, including for SBR relief cases (for a minimum 7 years), and ensure ongoing compliance year-round including domestic transfer pricing and KMP compliance. E-invoicing is also being implemented from 1 July 2026.
What to do: Implement proper accounting systems and prepare financials (even if unaudited) and consider using digital tax tools that can simplify reporting and ensure ongoing compliance.
MYTH 4: Only a CA or accountant can handle tax compliance.
Reality: While expert advice remains important, technology platforms empower SMEs to automate calculations and file accurately, lowering costs and reducing errors.
What to do: Use a trusted tax platform to streamline your compliance. Kuvera’s outsourcing services and tools are built for SMEs to handle tax filings accurately and efficiently, thus bridging the skills gap.
MYTH 5: Free Zone companies are automatically exempt from corporate tax.
Reality: Free Zone businesses are not automatically exempt from Corporate Tax. A Free Zone Person is subject to Corporate Tax but may benefit from a 0% rate on Qualifying Income, provided they meet the QFZP conditions under law (Article 18).
However, under Article 18, if a Free Zone Person earns income that does not qualify, or if they no longer meet the conditions to be a QFZP, that income (or the entire business) will be taxed under the general corporate tax regime @ 9% of the law.
What to do: If your business operates in a Free Zone, don’t assume you are exempt. Registration with the Federal Tax Authority (FTA) is still mandatory, and you must carry out an impact assessment to determine whether your revenues fall under Qualifying Income or are taxable under the standard corporate tax rules.
Final Thoughts
Corporate tax regulations in the UAE are still evolving, and SMEs that stay proactive will not only avoid penalties but also gain a competitive advantage. Compliance is no longer just a back-office requirement, it’s a strategic necessity for sustainable growth.
At Kuvera, we combine automation, diagnostics, and expert insights to simplify compliance for SMEs, so you can focus on growing your business while staying ahead of regulatory changes.
Ready to get a tax complaint framework implemented? Contact Kuvera today to learn how we can help your business thrive under the UAE corporate tax regime.