The rate is 9% above AED 375,000. A **Qualifying Free Zone Person** pays 0% on qualifying income — but the de minimis for non-qualifying revenue is the lower of **AED 5,000,000 or 5% of total revenue**, and breaching it loses the status for that period **and the following four**. One mainland invoice can cost more than the trade licence.
Corporate Tax
Registration, free zone status and the qualifying income test
The rate is 9% above AED 375,000. A Qualifying Free Zone Person pays 0% on qualifying income — but the de minimis for non-qualifying revenue is the lower of AED 5,000,000 or 5% of total revenue, and breaching it loses the status for that period and the following four. One mainland invoice can cost more than the trade licence.
| Item | Detail |
|---|---|
| Entity | [COMPANY NAME], licence [NUMBER] |
| Jurisdiction | [Mainland / Free zone — name it] |
| Tax period | [DATE] to [DATE] |
| Corporate tax registration number | [NUMBER], registered [DATE] |
| Total revenue for the period | AED [AMOUNT] |
| Claiming QFZP status? | [Y/N] |
| Qualifying revenue | AED [AMOUNT] |
| Non-qualifying revenue | AED [AMOUNT] |
| De minimis threshold | Lower of AED 5,000,000 or 5% of total revenue = AED [AMOUNT] |
| Within de minimis? | [Y/N] |
| Small Business Relief elected? | [Y/N — available for periods ending on or before 31 Dec 2026] |
| Return due by | [DATE] |
1. Registration
1.1Registration is mandatory for taxable persons, including free zone entities and businesses expecting no liability.
1.2A company below the AED 375,000 threshold, or electing Small Business Relief, still registers and still files.
1.3Registration deadlines depend on the entity and its licence date. Late registration attracts a penalty.
1.4The most common early error is assuming that no expected tax means no obligation. Registration and filing are separate from liability.
2. Rates and Reliefs
| Position | Rate | Note |
|---|---|---|
| Taxable income up to AED 375,000 | 0% | |
| Taxable income above AED 375,000 | 9% | The standard rate |
| Qualifying Free Zone Person — qualifying income | 0% | Conditional; see Section 3 |
| QFZP — non-qualifying income | 9% | No AED 375,000 threshold applies to a QFZP |
| Small Business Relief | Taxable income treated as nil | Revenue not exceeding AED 3,000,000 in the current and prior periods; elective; available for periods ending on or before 31 December 2026 |
| Large multinational groups | 15% minimum | Domestic Minimum Top-Up Tax under Pillar Two, for groups above the consolidated revenue threshold, from 1 January 2025 |
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Registration is mandatory for taxable persons regardless of whether tax is payable. Free zone entities register. Businesses below the threshold register. Businesses electing Small Business Relief register and file. Late registration attracts a penalty, and it is the most common first-year failure.
The 0% rate applies only to a Qualifying Free Zone Person, on qualifying income, while every condition is met. Marketing that describes free zones as tax-free is describing a conditional rate as though it were automatic. Read Section 3 before assuming the position.
Non-qualifying revenue must stay within the lower of AED 5,000,000 or 5% of total revenue. For a business with AED 4,000,000 of revenue, that ceiling is around AED 200,000 — one modest mainland engagement. Breach it and the 0% rate is lost for that period and the four following.
This is what makes the de minimis so serious. A single breach does not cost one year of the preferential rate; it costs that period plus four more, with a retest afterwards. The arithmetic on a marginal mainland invoice almost never works.
The only reliable control is analysing revenue between qualifying and non-qualifying every month and tracking headroom against the threshold. A year-end review finds a breach that could have been prevented in month four by declining or restructuring one engagement.
Adequate substance means people, premises, expenditure and core income-generating activity actually in the free zone. A licence with a flexi-desk and no genuine operations does not meet it, and substance is exactly what the FTA examines when testing QFZP claims.
Under current rules a Qualifying Free Zone Person must prepare audited financial statements. Small free zone companies frequently have not budgeted for an audit and discover the requirement when claiming the 0% rate.
Related-party transactions must be at arm’s length with documentation where thresholds are met, and compliance is a QFZP condition. Management fees, IP licences and intra-group services charged on convenience rather than analysis are the usual exposure.
It is available where revenue does not exceed AED 3,000,000 in the current and prior period, must be actively elected, and is available for tax periods ending on or before 31 December 2026. It also interacts with QFZP status — a free zone entity electing it gives up the QFZP position for that period. Model both before choosing.
The VAT designated zone list and the corporate tax qualifying activity analysis are separate regimes with separate lists. A zone designated for VAT purposes tells you nothing conclusive about corporate tax treatment, and conflating them produces confident but wrong advice.
The definition of qualifying and excluded activities has been revised by ministerial decision, with retroactive effect in at least one case. Confirm the current list rather than relying on an earlier analysis, particularly for distribution, financing and IP-related income.
Where mainland revenue is genuinely wanted, a mainland branch or subsidiary holding that business protects the free zone entity’s status. It costs more and requires clean separation, but it is materially cheaper than losing the 0% rate for five periods.
Contracts, invoices, bank statements and correspondence must be retained for seven years from the end of the tax period. For a QFZP the records also have to evidence the qualifying income analysis, not just the accounting entries.
The FTA penalty regime was substantially revised with effect from 2026. Penalties for late registration, late filing and errors have changed. Confirm the current schedule rather than working from earlier figures.
Reflects UAE tax law current as of {{DATE OF USE}}. Federal Decree-Law 47/2022, the Cabinet and Ministerial Decisions defining qualifying income and activities, Small Business Relief availability, Pillar Two rules and the FTA penalty regime all change — confirm the current position with the Federal Tax Authority or a UAE tax adviser before filing, and take advice on any QFZP claim.
This is a ready-to-use template provided for convenience. Laws and requirements change, and every situation is different — please have it reviewed by a qualified professional (a lawyer, corporate secretary, or accountant as relevant) before you rely on it.