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Yes, free zone companies pay UAE corporate tax, but many pay 0% on most of their income. Every free zone company must register with the Federal Tax Authority. A qualifying free zone person (QFZP) pays 0% on qualifying income and 9% on other taxable income. A free zone company that does not qualify pays the standard rates: 0% on taxable income up to AED 375,000 and 9% above it.
We are UAEFreeZoneDirectory.com, a directory of free zones, not the Federal Tax Authority or a tax agent. This page covers the rules that matter for a free zone company now and the dated rules that reach into 2027. No further change for 2027 has been announced; we update this page when one is.
What corporate tax rates apply to a free zone company?
| Case | Rate |
|---|---|
| Taxable income up to AED 375,000 | 0% |
| Taxable income above AED 375,000 | 9% |
| Qualifying free zone person, qualifying income | 0% |
| Qualifying free zone person, other income | 9% |
Source: UAE Government portal and Ministry of Finance corporate tax pages, checked .
The free zone licence alone does not make income tax free. The 0% rate applies only to qualifying income of a company that meets every QFZP condition for the whole tax period. Registration is required either way, it is free on EmaraTax, and the FTA says it processes a complete application in about 20 business days.
What is a qualifying free zone person?
A qualifying free zone person is a free zone company that meets the conditions set in the Corporate Tax Law, Cabinet Decision No. 100 of 2023 and Ministerial Decision No. 229 of 2025. In plain terms, the FTA expects the company to:
- keep adequate substance in the free zone: real staff, assets and spending for its core activities there
- earn qualifying income, as the decisions define it
- not elect to be taxed at the standard rates
- meet the transfer pricing rules
- prepare audited financial statements every year
A company that fails a condition loses QFZP status for that tax period and the next four. That is why the audit matters: see audit for a free zone company. Which income counts as qualifying depends on the activity and the customers, so ask a registered tax agent to check your own figures.
When does small business relief end?
Small business relief is open to a company whose revenue was AED 3,000,000 or less in the current period and every earlier one. The Ministry of Finance decision and the FTA apply it to tax periods ending on or before 31 December 2026 (Ministerial Decision No. 73 of 2023). A company with a calendar year gets its last relief year in 2026. A company with a different year end checks which period ends first.
From the next period, the standard rates apply unless something is announced. A qualifying free zone person cannot elect the relief, so a small free zone company picks one route or the other.
What are the corporate tax deadlines for a free zone company?
- Register within 3 months of incorporation, free of charge. The late registration penalty is AED 10,000.
- File the return and pay within 9 months from the end of the tax period.
- The registration penalty is waived if the first return is filed within 7 months from the end of the first tax period.
Steps and documents are on corporate tax registration.
QFZP or small business relief: which should a small company choose?
A small free zone company chooses between QFZP (needs the conditions and an audit) and the relief (ends with periods ending in 2026). Run both on real figures, with a tax adviser, before the year end. Questions worth putting to the adviser:
- Which tax period am I in, and when does it end?
- Do I meet every QFZP condition, and can I show it with audited accounts?
- If I choose the relief for the period ending in 2026, what do I lose?
- Does my year end fit my audit and bank timings?
We are a directory, so we pass your details to a licensed partner who answers these on your figures.
