A free zone company can pay 0% on qualifying income, but only as a Qualifying Free Zone Person meeting every condition; otherwise the standard rules apply.
It depends. If a free zone company qualifies as a 'Qualifying Free Zone Person' and its income meets the conditions for Qualifying Income, that income is taxed at 0%; any other income, or if it doesn't qualify, is taxed at the normal 9% rate above AED 375,000.
A Qualifying Free Zone Person must maintain adequate substance in the UAE, derive Qualifying Income, not have elected to be taxed under Article 19, and comply with Articles 34 and 55.
Qualifying Income includes income from transactions with other Free Zone Persons (except Excluded Activities), income from Qualifying Activities with Non-Free Zone Persons, Qualifying Intellectual Property income, and other income within a de minimis threshold, but excludes income attributable to a permanent establishment or from immovable property caught by Article 6.
If a Free Zone Person fails to meet the QFZP conditions, it is taxed at the standard rates - 0% up to AED 375,000 and 9% above that - on its entire Taxable Income from the start of that Tax Period, unless it qualifies as an Exempt Person. Based on FTA guidance
A Qualifying Free Zone Person is a free zone company that meets strict conditions and gets a 0% tax rate on its qualifying income, while any other income is taxed at 9%.
Article 18 of Federal Decree-Law No. 47 of 2022 sets out the five cumulative conditions a Free Zone Person must meet to be a Qualifying Free Zone Person.
Article 3 of Cabinet Decision No. 100 of 2023 defines Qualifying Income as income from Free Zone transactions, qualifying activities with non-Free Zone Persons, qualifying IP, and de minimis-eligible other income, excluding amounts attributable to a permanent establishment or immovable property income.
Article 4 of Cabinet Decision No. 100 of 2023 sets the de minimis threshold at the lower of AED 5 million or 5% of total revenue for non-qualifying revenue.
To pay 0% Corporate Tax as a Free Zone company, you must have real operations in the UAE, earn qualifying income, not have opted into normal tax, follow transfer pricing rules, keep audited accounts, and keep your non-qualifying income below AED 5 million or 5% of total revenue.
Article 18(1) of the Corporate Tax Law sets the core conditions: adequate substance, Qualifying Income, no election under Article 19, and compliance with Articles 34 (arm's length/transfer pricing) and 55 (documentation).
Article 5 of the Ministerial Decision on Qualifying Activities adds that non-qualifying revenue must not exceed the de minimis threshold and that audited financial statements must be prepared.
FTA guidance summarises the de minimis threshold as the lower of AED 5 million or 5% of total revenue. Based on FTA guidance
Your free zone company can earn a small amount of non-qualifying income without losing its tax benefits, as long as it stays under whichever is lower: 5% of total revenue or AED 5,000,000.
The de minimis requirements are met where non-qualifying Revenue in a Tax Period does not exceed the lower of 5% of total Revenue or AED 5,000,000.
Non-qualifying Revenue comprises income from Excluded Activities, non-Qualifying Activities with Non-Free Zone Persons, and transactions with Free Zone Persons who are not the Beneficial Recipient.
Certain Revenue is excluded from both the non-qualifying and total Revenue figures, including income attributable to a Domestic or Foreign Permanent Establishment, most Free Zone immovable property transactions, and non-qualifying IP income.
A free zone company only pays 0% tax on certain income: sales to other free zone businesses (where they're the real user of the goods/service), income from approved 'qualifying activities' with non-free zone customers, income from qualifying intellectual property, and a small amount of other income if it stays under a set limit. Everything else, including any income tied to a UAE branch outside the free zone or to non-commercial property, is taxed normally.
Article 18 of the Corporate Tax Law requires a Qualifying Free Zone Person to derive Qualifying Income as specified by Cabinet Decision, maintain adequate substance, not elect out, and comply with transfer pricing and record-keeping provisions.
Article 3 of Cabinet Decision 100 of 2023 lists the four categories of Qualifying Income (Free Zone-to-Free Zone transactions, Qualifying Activities with Non-Free Zone Persons, Qualifying IP income, and de minimis-covered other income), excluding income tied to a Permanent Establishment or immovable property as defined in Articles 5 and 6.
Article 4 of Cabinet Decision 100 of 2023 sets the de minimis test comparing non-qualifying revenue to total revenue, below a Ministerial-set percentage or amount, whichever is lower.
It depends on what you're selling. Income from mainland (non-Free Zone) customers only qualifies for the 0% rate if it comes from specific 'Qualifying Activities' and isn't an 'Excluded Activity' - otherwise it's taxed at 9% like normal business income.
A Qualifying Free Zone Person is taxed at 0% on Qualifying Income and 9% on all other Taxable Income.
Income from a Non-Free Zone Person is Qualifying Income only to the extent it arises from Qualifying Activities that are not Excluded Activities.
Such income must also not be attributable to a Domestic or Foreign Permanent Establishment, nor derived from immovable property, to remain Qualifying Income.
Guidance only, not tax advice. Answers were drafted by TI from the FTA’s published law and last updated on 25 September 2026; rely on the official text and a registered tax agent before you file.