Free zone companies and the 0% Corporate Tax rate
Free zone companies can still pay 0% Corporate Tax, but only on the right income and only if they meet strict conditions.
- A qualifying free zone person pays 0% on qualifying income.
- Non-qualifying income is taxed at 9%, without the AED 375,000 0% band.
- Substance, audited accounts and transfer pricing rules all apply.
Being in a free zone isn't enough
Every free zone company must register and file for Corporate Tax. The 0% rate is only available to a qualifying free zone person, and only on its qualifying income.
The main conditions
- Maintain adequate substance in the free zone: real people, assets and activity
- Earn qualifying income from qualifying activities
- Stay within the de minimis limit for non-qualifying revenue (generally the lower of 5% of revenue or AED 5 million)
- Prepare audited financial statements
- Follow transfer pricing rules for related-party transactions
- Not elect to be taxed at the standard rate
What happens to other income
Income that isn't qualifying income is taxed at 9%, and the AED 375,000 0% band does not apply to it. Breaching the conditions can mean losing qualifying status for that year and the following four years.
How we help
We review your activities and income streams, confirm whether you qualify, prepare the audited financial statements and file your return with the right treatment.
Our corporate tax services cover everything in this guide, from registration to filing.
This guide is general information about UAE tax rules as of 29 October 2026, not tax advice for your business. Rules and FTA practice change; speak to an adviser before acting.