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. The headline rates are 0% on taxable profits up to AED 375,000 and 9% above that. Free-zone companies can still access a 0% rate on "qualifying income" if they meet the conditions to be a Qualifying Free Zone Person — but 9% can apply to income that doesn't qualify. This is a general guide, not tax advice; confirm your position with a qualified UAE tax advisor 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, with 9% only on non-qualifying income. 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.
If your company's revenue is AED 3 million or less, you may elect Small Business Relief and be treated as having no taxable income for that period — a simple way for small founders to stay at effectively 0%. This relief is time-limited under the current rules, so check whether it still applies to your tax period.
Yes. Even if you expect to pay 0%, UAE companies generally must register for corporate tax and file an annual return. Being a free-zone company or qualifying for 0% does not remove the registration and filing obligation, and penalties apply for late registration.
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.
Most small free-zone founders will pay little or no corporate tax — 0% under the AED 375,000 threshold or Small Business Relief, and potentially 0% on qualifying income as a QFZP — but everyone still has to register and file, and the qualifying-income rules reward getting advice. Formenzo isn't a tax advisor: we compare free-zone setup costs honestly and can point you to the right specialist for the tax detail. Figures here reflect the 2026 framework and may change — always confirm with the Federal Tax Authority or a licensed advisor.
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UAE corporate tax is 0% on taxable profit up to AED 375,000 and 9% above. A free-zone company that qualifies as a Qualifying Free Zone Person can pay 0% on its qualifying income, with 9% on non-qualifying income. Even at 0%, companies must register and file. Confirm your position with a tax advisor or the Federal Tax Authority.
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.
Yes. The first AED 375,000 of taxable income is taxed at 0%, and 9% applies above that. Separately, companies with revenue up to AED 3 million may elect Small Business Relief and be treated as having no taxable income for that period, subject to the current time limit.
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.
