A free-zone licence does not create a blanket 0% Corporate Tax exemption. A Free Zone Person is within the Corporate Tax system, and the 0% rate is available only to a Qualifying Free Zone Person on Qualifying Income when all relevant conditions remain satisfied.
Separate registration from rate eligibility
A Free Zone Person generally registers and files a Corporate Tax return. The analysis then determines whether it is a Qualifying Free Zone Person and which income qualifies for 0%, is taxed at 9%, or is outside the qualifying regime.
Map every revenue stream
- Transactions with other Free Zone Persons
- Activities with mainland or foreign customers
- Qualifying activities and excluded activities
- Intellectual-property income
- Immovable-property income
- Income attributable to domestic or foreign permanent establishments
- Transactions with natural persons
Monitor the de minimis limit
The Ministry of Finance describes the non-qualifying revenue limit as the lower of 5% of total revenue or AED 5 million, subject to specific exclusions from the calculation. Test the limit throughout the year and retain transaction-level classifications.
Document substance and transfer pricing
Maintain adequate substance in the UAE for the activities performed and comply with the arm's-length principle for related-party and connected-person transactions. Outsourcing can have conditions; a contract alone does not prove the required people, assets, expenditure, oversight, or activity.
Understand the consequence of failure
The Ministry of Finance states that failing the de minimis requirement or another qualifying condition can remove access to the Free Zone Corporate Tax regime for a minimum five-year period. That makes early classification and periodic testing more valuable than a year-end-only review.
Build an evidence file
- Licence and legal-entity documents
- Activity and customer classification matrix
- Contracts and invoices by revenue stream
- Employee, asset, premises, and expenditure evidence
- Related-party agreements and pricing support
- Permanent-establishment and property analysis
- Quarterly de minimis calculations
Frequently asked questions
Does every free-zone company receive a 0% Corporate Tax rate?+
No. The 0% rate is for a Qualifying Free Zone Person's Qualifying Income when the required conditions are met.
What is the free-zone de minimis limit?+
The Ministry of Finance describes it as the lower of 5% of total revenue or AED 5 million, with specific items excluded from the calculation.
Official sources
Use the government pages below to verify current instructions and requirements.
UAE Ministry of Finance: Corporate Tax in the UAE ↗UAE Ministry of Finance: Decisions for Free Zones ↗Bring the notice, return, or records to a focused consultation.
No pressure and no vague promises. We will help define the issue, documents needed, and the next sensible step.