Free Zone Companies and UAE Corporate Tax: Registration, Returns and the 0% Rate

A common misunderstanding is that a free zone licence means no Corporate Tax obligations. In fact, every free zone company is a taxable person under UAE Corporate Tax law. It must register with the FTA and file a Corporate Tax return every year, even when its tax due is zero.

Registration and annual returns

• Register for Corporate Tax through EmaraTax and obtain a Corporate Tax registration number.
• File the annual return within 9 months after the end of your financial year.
• Keep your records for at least 7 years.

When does the 0% rate apply?

The 0% rate applies only to the qualifying income of a Qualifying Free Zone Person (QFZP). To be a QFZP, a company must, among other conditions:

• maintain adequate substance in the free zone (assets, staff and operating expenses);
• earn qualifying income;
• not elect to be taxed at the standard rates;
• comply with transfer pricing rules; and
• prepare audited financial statements (by an independent registered auditor).

Income that is not qualifying is taxed at 9%. If non-qualifying revenue goes above the de minimis limit — 5% of total revenue or AED 5 million, whichever is lower — the company can lose QFZP status.

Small Business Relief is not available to a QFZP

A Qualifying Free Zone Person cannot elect Small Business Relief. You need to decide which position fits your business and document it in your return.

Practical steps

• Check that you are registered and know your first return due date.
• Map your revenue into qualifying and non-qualifying income.
• Arrange your audited financial statements early so the return is not delayed.

Related reading: UAE Corporate Tax rates explained.

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General information only, not advice for your specific situation.