Do free-zone companies pay UAE corporate tax? The 0% and 9% rates, the Qualifying Free Zone Person 0% rate, Small Business Relief and registration — in plain English.
Since financial years starting on or after 1 June 2023, the UAE has a federal corporate tax. A standard Taxable Person is 0% on taxable income up to AED 375,000 and 9% above that. A Qualifying Free Zone Person (QFZP) follows a separate path: 0% on qualifying income and 9% on taxable income that is not qualifying, without the AED 375,000 standard band. This is a general guide, not tax advice; confirm your position with a qualified UAE tax adviser or the Federal Tax Authority.
A free-zone company that meets all the conditions can be a Qualifying Free Zone Person (QFZP) and pay 0% on its qualifying income. Its taxable income that is not qualifying is 9% without the standard AED 375,000 band. Broadly, a QFZP must:
The exact definition of qualifying income and activities is detailed and has been refined by ministerial decisions, so this is the one area to confirm with a tax professional for your specific business.
An eligible resident person may elect Small Business Relief if revenue is AED 3 million or less in the current and all prior tax periods, subject to the FTA rules and time limit. A QFZP cannot elect Small Business Relief. Check the current relief conditions before relying on it.
Most free-zone juridical persons are Taxable Persons and must register for corporate tax and file an annual return under the applicable FTA rules. A 0% result does not itself remove that obligation; check the current registration deadline and any waiver initiative with the FTA.
VAT is separate from corporate tax. The UAE charges 5% VAT, and you must register once your taxable turnover passes AED 375,000 a year (voluntary registration is available from AED 187,500). Many free-zone service and trading businesses register for VAT regardless of their corporate-tax position.
Some founders may have a low corporate-tax result, but the rate path matters: standard 0%/9% bands, or QFZP qualifying versus non-qualifying income. Formenzo is not a tax adviser; we compare free-zone setup scenarios and can point you to the right specialist for tax detail. Figures may change — always confirm with the Federal Tax Authority or a licensed adviser.
Compare published scenarios, then receive the final authority itemisation and validity date in writing after review and before payment.
A QFZP is 0% on qualifying income and 9% on taxable income that is not qualifying, without the AED 375,000 standard band. A free-zone company that is not a QFZP uses the standard 0%/9% bands. Confirm your position with a tax adviser or the FTA.
A Qualifying Free Zone Person is a free-zone company that meets conditions — adequate substance, qualifying income, staying within the de minimis limit, transfer-pricing compliance and audited accounts — and so pays 0% corporate tax on qualifying income. The detailed definition of qualifying income is best confirmed with a tax professional.
For a standard Taxable Person, 0% applies to taxable income up to AED 375,000 and 9% above it. A QFZP does not use that standard band: qualifying income is 0% and taxable income that is not qualifying is 9%. A QFZP cannot elect Small Business Relief.
Yes. UAE companies generally must register for corporate tax and file an annual return even if they expect to pay nothing, including free-zone companies and those qualifying for 0%. Late registration carries penalties.
Yes. Corporate tax applies to business profit, not personal income. The UAE still has 0% personal income tax on salaries and personal earnings, alongside 5% VAT on most goods and services.
