What's my company's effective tax rate — and why isn't it necessarily 9%?

Your effective rate is the total tax you actually paid divided by your total pre-tax profit — not the 9% figure that only applies to the bracket above AED 375,000. So a company with AED 500,000 in annual profit, for example, is only taxed on AED 125,000 of it (500,000 minus 375,000), meaning tax due is AED 11,250 — an effective rate of just 2.25% of total profit, not 9%.

The higher a company's profit climbs, the closer its effective rate gets to 9%, because the exempt bracket becomes a smaller share of total profit. Knowing your effective rate matters for comparing this year's performance to last year's accurately, instead of assuming tax is always a flat 9% of every dirham of profit. At RASEEKH, we calculate your effective rate every year as part of your tax reporting, so you understand the real impact on your bottom line.