Tax

UAE 9% Corporate Tax: what changes for Free Zone companies?

Since 1 June 2023, the UAE is no longer a universal zero-tax jurisdiction. But the important news for Free Zone operators is this: the 0% regime is still available — if you meet five objective criteria. Here they are.

The basics of UAE Corporate Tax

UAE Corporate Tax has three brackets:

• 0% on taxable profit up to AED 375,000 per year (≈ USD 102,000).
• 9% on taxable profit above that threshold.
• 15% for multinationals covered by OECD Pillar Two (consolidated revenue above EUR 750M).

For the vast majority of timewise clients — individual entrepreneurs and SMEs — the choice is between 0% (with QFZP) and 9%.

The Qualifying Free Zone Person (QFZP) regime

A Free Zone company that meets all the criteria of the Qualifying Free Zone Person regime keeps 0% indefinitely on "Qualifying Income" — even above AED 375,000. The five criteria:

1. Adequate substance in the UAE — local office, real operating expenses, employees or a director with effective presence.
2. Qualifying income — revenue from other Free Zones or from customers outside the UAE. Mainland revenue qualifies in specific cases (listed qualifying activities).
3. Did not elect the 9% regime — a company can voluntarily waive QFZP, but that's irrevocable.
4. Transfer pricing compliance — related-party transactions at arm's length, documented.
5. De minimis: non-qualifying revenue ≤ AED 5M or 5% of total revenue — whichever is lower. Above that, you lose QFZP for the entire year.

What is qualifying income?

Typically:

• Revenue billed to entities outside the UAE (the largest category for our clients).
• Revenue billed to other Free Zone Persons in qualifying transactions.
• Distribution and manufacturing within/between designated Free Zones.
• Holding equity investments and qualifying fund management activities.
• Vessel leasing, logistics services, and special sector regimes.

The official list is technical and detailed — the Ministry of Finance publishes updated regulations. Before assuming your activity is covered, a specific analysis is worth it.

What about personal income tax?

Still 0% for UAE tax residents. Salary, dividends, capital gains — none are subject to UAE personal tax. Corporate Tax applies to the company, not the shareholder.

This matters because distributing profits as dividends to a UAE-resident shareholder reaches their personal account without local withholding.

And taxation in the country of origin?

Important: the UAE's favourable regime does not automatically replace tax obligations in your current country of residence. If you're still tax-resident in Portugal, Spain or the UK, distributed profits may be taxable under your home country's rules.

The common solution is to transfer tax residency to the UAE via the investor visa. See our investor visa guide and the article on Portuguese vs. Dubai tax residency.

Registration and filing

Every UAE company (Free Zone or Mainland) must:

• Register for Corporate Tax with the Federal Tax Authority (FTA) by specific deadlines based on licence tier.
• Maintain auditable accounting to IFRS (or IFRS for SMEs for smaller companies).
• File an annual Corporate Tax return within 9 months of the fiscal year-end.
• Pay any tax due — if applicable — within the same deadline.

Being under the 0% regime does not exempt you from registration or filing. Failing to comply results in fines regardless of whether the tax owed is zero.