2. Understanding UAE Corporate Tax Rates for Free Zones
The standard corporate tax structure applies 0% to income up to AED 375,000 and 9% on income exceeding this threshold. Qualifying Free Zone Persons (QFZP) can access a 0% rate on their qualifying income regardless of the amount, representing substantial tax savings.
Not all free zone businesses automatically qualify. The Federal Tax Authority has established specific criteria that must be met to benefit from the 0% rate.
3. Qualifying Free Zone Person: Four Essential Criteria
To qualify for 0% corporate tax, your business must meet all four criteria:
3.1 Maintain Adequate Substance
Your business must have genuine physical presence in the free zone through office space, qualified employees conducting core activities, and operational infrastructure. Virtual offices or flexi-desk arrangements typically do not satisfy this requirement.
3.2 Derive Qualifying Income
Income must qualify under Cabinet Decision No. 55 of 2023. Qualifying activities include manufacturing and processing of goods, holding of shares and securities, and logistics services. Income from transactions with other Qualifying Free Zone Persons can also qualify.
3.3 Do Not Elect Standard Tax Treatment
You must not have made an election to be subject to standard corporate tax rules. Once made, this election may have lasting effects.
3.4 Comply with Transfer Pricing Rules
All related party transactions must be conducted at arm’s length prices. Proper documentation is required to demonstrate compliance.
4. The De Minimis Rule
Non-qualifying income is permitted up to specific thresholds. Your non-qualifying income must not exceed the lower of AED 5 million or 5% of total revenue. Exceeding this limit means your entire income becomes subject to the 9% rate.
5. Small Business Relief: Alternative Pathway
For smaller businesses, Small Business Relief provides zero corporate tax liability until December 31, 2026. Qualifying requires revenue of AED 3,000,000 or less in both the current and all previous tax periods. This relief does not require specific substance tests or income qualification assessments.
6. Special Offer: Free Corporate Tax Assessment
Limited Time Offer — Until 31st January 2025
FREE Corporate Tax Assessment for new clients. This assessment analyzes your free zone business structure, evaluates QFZP eligibility, identifies potential tax savings, and provides actionable recommendations.
Our expert team examines your QFZP eligibility, reviews qualifying income classification, assesses substance requirements, and develops customized tax optimization strategies. Don’t miss this opportunity to optimize your corporate tax position at no cost.
7. Ready to Optimize Your Corporate Tax Position?
UAE free zone businesses have exceptional opportunities to benefit from corporate tax exemptions, but accessing these benefits requires understanding the QFZP criteria and compliance requirements. STH Financial Services specializes in helping free zone businesses navigate UAE corporate tax requirements and secure available exemptions.
Contact STH Financial Services today:
- Phone: +971 52 629 1147
- Email: support@sthfinancial.com
- Visit sthfinancial.com to learn more about our corporate tax services
