UAE Corporate Tax for Free Zone Companies Explained

Since corporate tax arrived in the UAE, "tax-free" free zones need a closer look. Here's the simple version. This is general guidance, not tax advice — always confirm your position with a registered tax agent.

The headline rates

• 0% on taxable income up to AED 375,000
• 9% on taxable income above AED 375,000
• 0% on qualifying income for a Qualifying Free Zone Person (QFZP) that meets all the conditions

Every free zone company must register

Even if you expect to pay nothing, your company must register for corporate tax, keep proper books and file returns on time. Late registration can bring penalties.

Who is a Qualifying Free Zone Person?

Broadly, a free zone company that:

• Keeps adequate substance in the UAE (real activity, people and assets for its business)
• Earns qualifying income (for example from other free zone businesses or from qualifying activities)
• Keeps non-qualifying revenue within the de minimis limits
• Prepares audited financial statements
• Follows transfer pricing rules for related-party deals
• Hasn't chosen to be taxed under the standard regime

If you fail a condition, you can lose QFZP status for the current year and several following years. That's why getting the structure right at the start matters.

Typical situations

• Consultant billing overseas clients from a free zone — often qualifies, but check the activity and substance rules.
• Selling to UAE mainland consumers — income from mainland customers is often non-qualifying and may be taxed at 9% above the threshold.

Small business relief

Small business relief is designed for small mainland and non-QFZP businesses. A qualifying free zone person can't use it, so choose the right route with your accountant.

How we help

We register your company for corporate tax as part of setup and connect you with accountants for bookkeeping, audits and filings. See the service.