Corporate tax · Free zones
Free zone is not automatically 0% tax
The claim you should stop believing
Much UAE setup marketing still says “free zone = 0% tax.” Under the Corporate Tax Law and the FTA Free Zone Persons Guide (CTGFZP1), that sentence is incomplete. A Free Zone Person that meets all Qualifying Free Zone Person conditions is taxed at 0% on Qualifying Income and 9% on Taxable Income that is not Qualifying Income.
Customer geography, activity lists, substance, audited financials, transfer-pricing rules, and the de minimis test decide whether the 0% story survives contact with a return.
Conditions that actually matter
- Maintain adequate substance in the UAE as required for QFZP status.
- Derive Qualifying Income within the categories set out in the Free Zone Persons rules.
- Do not elect out into the standard Corporate Tax regime if you intend to keep QFZP treatment.
- Comply with arm's length / transfer-pricing documentation requirements.
- Meet the de minimis test: non-qualifying Revenue not exceeding the lower of 5% of total Revenue or AED 5,000,000 in the tax period.
- Prepare and maintain audited financial statements as required for QFZP.
Mainland customers and “other income”
Income from Non-Free Zone Persons is not automatically Qualifying Income. FTA guidance ties 0% treatment for those counterparties to Qualifying Activities that are not Excluded Activities, plus the broader QFZP conditions. Active services into the UAE mainland are where many consultancy and agency models discover that the brochure rate was never the filing rate.
“Other income” can remain compatible with QFZP status only within the de minimis limits. Treat mainland revenue share as a design input at formation — not a surprise at filing.
How this sits next to Small Business Relief
Small Business Relief is a temporary revenue-based election ending for periods after 31 December 2026, and Qualifying Free Zone Persons are outside that relief. Choosing a free zone for visas and brand address is still a formation decision; choosing SBR vs QFZP vs standard rates is a tax election decision. Keep them in separate conversations with a licensed advisor.
For zone shortlisting without tax theatre, use the Free Zone Matcher. For fee honesty, use the hidden-costs guide.
FAQ
Is every UAE free zone company taxed at 0%?
No. Under Federal Decree-Law No. 47 of 2022 and the FTA Free Zone Persons Guide, 0% applies to Qualifying Income of a Qualifying Free Zone Person that meets the statutory conditions. Other taxable income is charged at 9%. Incorporation in a free zone alone is not enough.
What is the de minimis test?
FTA guidance states that non-qualifying Revenue must not exceed the lower of 5% of total Revenue or AED 5,000,000 in the tax period. Breach the test and QFZP status is lost for that period under the rules described in the Free Zone Persons Guide — confirm consequences and any multi-year effects in the current primary text.
Can I use Small Business Relief and QFZP at the same time?
FTA Small Business Relief guidance excludes Qualifying Free Zone Persons from that relief. They are alternative paths for different profiles — see the Small Business Relief 2026 guide.
Does QFZP get the AED 375,000 0% band?
The FTA Free Zone Persons Guide states that a QFZP is not eligible for the standard 0% rate on Taxable Income up to AED 375,000; non-qualifying taxable income is taxed at 9%. Confirm in CTGFZP1 before modelling.