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Free zone 0%: what it really takes to qualify
This is where most of the confusion sits. A free zone licence does not make your company tax-free. A free zone company still falls under corporate tax, and it only gets 0% if it is a Qualifying Free Zone Person earning qualifying income. Miss a condition and you pay 9% on that income from the first dirham, with no AED 375,000 band.
Earn qualifying income
Mainly from international clients or other free zone companies, not from UAE mainland customers or excluded activities.
Keep real substance
Genuine staff, premises and activity in the free zone, not just a registered address.
Stay within the de minimis limit
Non-qualifying revenue must stay under the lower of 5% of total revenue or AED 5 million.
Meet the compliance rules
Apply arm’s-length transfer pricing, keep the documents, and file audited financial statements.
The AED 375,000 band
Every company, mainland or free zone, pays 0% on the first AED 375,000 of taxable profit. Only profit above that is taxed at 9%, so genuinely small companies often pay very little.
Small Business Relief
A UAE business with revenue at or below AED 3 million can elect to be treated as having no taxable income at all. It is an annual election, currently available through the end of 2026, and it is not open to free zone 0% companies or large groups.
Registering, filing and the deadlines that matter
Almost every UAE company has to register for corporate tax, even one that ends up paying nothing, including free zone companies on 0%. Here are the obligations, and how we keep you clear of the fines.
A company set up from March 2024 generally registers within three months of being established. Late registration carries an AED 10,000 penalty, though the FTA waives it if you file your first return within seven months of the first tax period ending.
With us: we register you on EmaraTax well inside the deadline.
The corporate tax return is filed once a year, within nine months of your financial year-end. For a company on a calendar year, the 2025 return is due by 30 September 2026. Late filing costs AED 500 a month for the first year, then AED 1,000 a month.
With us: we prepare your audited figures and file the return on time.
Even at 0%, you need proper books, and free zone companies need audited financial statements and transfer pricing documents to hold their status. Poor records are what turn a routine filing into a problem.
With us: we keep your bookkeeping clean and audit-ready all year.
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Frequently Asked Questions (FAQs)
The questions UK founders ask us most about choosing where to set up in the UAE. Rules change, so treat these as a guide and confirm your own case before you commit.
What is the UAE corporate tax rate?
It is 9% on taxable profit above AED 375,000, and 0% on profit up to that figure. Qualifying free zone companies can pay 0% on qualifying income, and a 15% top-up applies only to very large multinational groups.
When did UAE corporate tax start?
It applies to financial years starting on or after 1 June 2023, introduced under Federal Decree-Law No. 47 of 2022. Annual filing began from 2024 onward.
Is corporate tax on profit or turnover?
On profit. It is charged on your net profit after allowable costs, not on your revenue. That makes it different from VAT, which is charged on sales.
Do free zone companies pay corporate tax?
They fall under corporate tax, but can pay 0% on qualifying income if they meet all the Qualifying Free Zone Person conditions. A free zone licence does not make a company automatically tax-free, and non-qualifying income is taxed at 9%.
What is a Qualifying Free Zone Person?
A free zone company that meets the conditions for the 0% rate: qualifying income, real substance in the zone, non-qualifying revenue within the de minimis limit, transfer pricing compliance, and audited financial statements.
What happens if I lose QFZP status?
You move to the standard 9% rate for that year and the next four, five years in total before you can re-qualify. It is the most costly free zone mistake, which is why we review qualifying income regularly.
What is Small Business Relief?
A UAE business with revenue at or below AED 3 million can elect to be treated as having no taxable income. It is an annual election, currently available through the end of 2026, and is not open to free zone 0% companies or large groups.
Do I have to register even if I pay nothing?
Yes. Almost every UAE company must register for corporate tax on the EmaraTax portal, including free zone companies on 0% and companies below the profit threshold.
When is the corporate tax return due?
Within nine months of your financial year-end. For a company on a calendar year, the 2025 return is due by 30 September 2026. Filing late brings monthly penalties.
What are the penalties?
Late registration carries a AED 10,000 penalty, which the FTA waives if you file your first return within seven months of the first period ending. Late filing costs AED 500 a month for the first year, then AED 1,000 a month.
Is corporate tax the same as VAT?
No. Corporate tax is 9% on profit, filed annually. VAT is a separate 5% tax on sales, filed quarterly. Both apply to many businesses, and our VAT page covers the 5% side.
How does UAE corporate tax compare to the UK?
The UAE’s 9% rate, with a 0% band and a 0% free zone route, is well below the UK’s 25% corporation tax. It is a genuine saving for a UAE company, though your personal UK tax depends on your own residence, which we plan separately.
Get your corporate tax right from the start
Book a free consultation. We will confirm your rate, check your free zone 0% status, and handle registration and filing.
