Corporate tax for free zone companies in UAE is charged under the same federal law as the rest of the country, but free zone businesses can access a 0% rate on qualifying income if they meet strict conditions. A free zone company that qualifies as a Qualifying Free Zone Person (QFZP) pays 0% on its qualifying income and 9% on any non-qualifying income.
This 0% rate is not automatic — it depends on meeting several conditions, including maintaining real substance in the UAE, earning qualifying income, keeping non-qualifying income within strict limits, following transfer pricing rules, and preparing audited financial statements. Importantly, every free zone company must still register for corporate tax and file an annual return, even if it pays 0%.
Getting this right protects valuable tax benefits. Risians Accounting is an FTA-certified firm that helps free zone businesses qualify for and maintain their corporate tax benefits in the UAE.
Corporate tax for free zone companies in the UAE means free zone businesses fall under the federal corporate tax law, but may keep a preferential 0% rate on qualifying income. They are not exempt — they are conditionally favoured.
Under Federal Decree-Law No. 47 of 2022, the standard corporate tax is 9% on taxable income above AED 375,000 — the rate that applies to any business that does not meet QFZP conditions.
Free zone companies that meet the QFZP conditions pay 0% on qualifying income and 9% on non-qualifying income. The rate is activity-based, not income-level-based — the AED 375,000 threshold that helps mainland firms does not apply to QFZP qualifying income.
The benefit comes from what you earn and how you operate, not simply from being in a free zone. As an FTA-certified firm, Risians guides free zone businesses through it. You can explore the broader corporate tax services in Dubai practice for the full picture. Free zone companies fall under corporate tax but can earn 0% on qualifying income as a QFZP — it is conditional, not automatic.
The main corporate tax benefit for free zone companies is the 0% rate on qualifying income, which can mean significant savings compared with the standard 9%. But the benefit only exists while the conditions are met. In practice, a QFZP pays no corporate tax on income from qualifying activities — such as manufacturing, processing, trading qualifying commodities, holding investments, and certain services to other free zone or non-UAE persons. For a qualifying business, that 0% rate is a real competitive advantage, freeing profit to reinvest. It sits alongside the wider free zone advantages of 100% foreign ownership and customs benefits.
Key risk: Non-qualifying income — for example, most sales to mainland UAE customers — is taxed at 9%, and too much of it can cost you the entire QFZP benefit, pushing all your income to 9%.
The 0% rate is valuable but conditional, and worth protecting carefully. Risians helps secure it, connected to corporate tax registration in Dubai, UAE. The key benefit is 0% on qualifying income — a real saving, but only while every QFZP condition is met.
Qualifying for the 0% rate means meeting all of the QFZP conditions, every year — missing even one moves your whole income to 9%. The conditions are specific and must be documented.
Meeting all of these is what secures the 0% rate. Risians supports this with external audit services and accurate accounting services. A free zone company qualifies by meeting every QFZP condition — substance, qualifying income, de minimis, transfer pricing, and audited accounts.
The de minimis rule is the single most important — and most dangerous — threshold for free zone companies, because breaching it has a cliff-edge effect. It limits how much non-qualifying income a QFZP can earn. Under the rule, your non-qualifying revenue must not exceed the lower of AED 5 million or 5% of your total revenue in the tax period. Stay within it, and that non-qualifying income is simply taxed at 9% while your qualifying income stays at 0%. Exceed it — even slightly — and you lose QFZP status for the entire period, meaning all your income, qualifying included, is taxed at 9%.
Example: A free zone firm with AED 8 million total revenue breaches the 5% cap with just AED 500,000 of non-qualifying income (6.25%), pushing the full AED 8 million to 9% corporate tax. Worse, losing status can bar you from requalifying for the next four tax periods.
Monitoring non-qualifying revenue all year is essential — not a year-end task. Risians helps you track and manage it, with full tax compliance and corporate tax assessment services in Dubai, UAE. Non-qualifying income must stay below the lower of AED 5 million or 5% of revenue — breaching it taxes all income at 9%.
Yes — corporate tax filing for free zone companies is mandatory, even for those paying 0%, and assuming otherwise is a costly error. Registration and filing apply to every free zone entity.
Every free zone company must register with the FTA and obtain a Corporate Tax Registration Number (TRN), including QFZPs claiming 0% on all their income.
An annual corporate tax return must be filed, clearly separating qualifying from non-qualifying income and declaring QFZP status — due within nine months of your financial year-end.
Late filing brings the same automatic monthly penalties as any other business — AED 500 per month for the first 12 months, rising to AED 1,000 per month after that.
The FTA cross-checks figures and now reviews QFZP claims closely, so accurate, well-documented filing is what protects your status and keeps you penalty-free.
Filing is not optional, and doing it correctly is part of keeping your 0% rate. Risians manages this through corporate tax return filing in Dubai, UAE. You can review common questions on the FAQs page. Every free zone company must register and file annually, even at 0% — separating qualifying and non-qualifying income.
Risians Accounting helps free zone businesses qualify for, claim, and maintain their 0% corporate tax rate, so you protect valuable benefits while staying fully compliant. As an FTA-certified accounting, auditing, and tax firm in Downtown Dubai, the team has supported over 500 businesses across the UAE in more than eight years of practice.
The approach is thorough: assess your QFZP eligibility, separate your qualifying and non-qualifying income, monitor your de minimis position throughout the year, prepare audited IFRS financials, and file an accurate return that defends your status. Because the firm covers the full corporate tax lifecycle and corporate tax audit support in Dubai, UAE, you get one trusted partner to keep your free zone tax benefits secure. Risians helps free zone companies qualify for and defend their 0% corporate tax rate while staying fully compliant.
Want to secure your free zone 0% rate? Risians Accounting’s FTA-certified team assesses your QFZP eligibility, monitors your de minimis position, and files your return accurately. Get in touch for a free consultation — call +971 52 341 4327 or email enquire@risiansaccounting.com today.
Free zone companies fall under the federal corporate tax law but can earn a 0% rate on qualifying income as a Qualifying Free Zone Person (QFZP), with 9% on non-qualifying income. The 0% rate is conditional, not automatic.
No. A free zone company must meet all QFZP conditions — substance, qualifying income, the de minimis limit, transfer pricing compliance, no standard-regime election, and audited financial statements — every year to keep the 0% rate.
Non-qualifying revenue must not exceed the lower of AED 5 million or 5% of total revenue in the tax period. If it does, the company loses QFZP status for that period and all income is taxed at 9%.
Yes. Every free zone company must register for corporate tax and file an annual return within nine months of its year-end, even if it pays 0%. The return must separate qualifying and non-qualifying income.
Risians is an FTA-certified firm that has supported over 500 UAE businesses in more than eight years. The team assesses your QFZP eligibility, prepares audited financials, monitors de minimis, and files returns that defend your 0% status.
Risians Accounting & Tax Consultancy is an FTA-certified accounting, auditing, and tax advisory firm. Based in Downtown Dubai, we provide comprehensive financial solutions to businesses throughout the UAE.
