VERIFIED 2026 · FORMENZO
Do UAE free-zone companies pay corporate tax?
A UAE free-zone company can still pay 0% corporate tax. A Qualifying Free Zone Person (QFZP) pays 0% on its qualifying income; income that does not qualify is taxed at the standard 9% on profits above AED 375,000. To keep the 0% rate the company must maintain adequate substance in the zone, earn qualifying income and not elect to be taxed normally. Personal income remains 0%.
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How the 0% rate works in practice
Qualifying Free Zone Person status is not automatic — it is a set of conditions the company must keep meeting. The income has to qualify (broadly, business with customers outside the UAE or with other free-zone companies), the company needs real substance in its zone — people, premises or activity proportionate to what it earns — and its accounts must stand up to Federal Tax Authority review. Fall outside those conditions and the standard 9% applies to profits above AED 375,000.
Who plans around the 0% rate
QFZP status matters most to service exporters — a Sharjah consultant invoicing clients in Europe, a software studio selling to overseas customers — and to traders whose buyers are other free-zone entities. Founders selling mainly to UAE mainland consumers should budget for the 9% band from the start.
Two things founders ask
Do you still register with the FTA if you expect 0%? Yes — every free-zone company must register for corporate tax and file a return, even in years where the rate applied is zero.
Does licence cost affect tax status? No — a company formed for AED 4,888 all-in faces the same QFZP tests as one formed at DMCC for AED 35,484; the rules ignore what the setup cost.