The UAE introduced 9% corporate tax in 2023. Free zone companies can still benefit from 0% under Qualifying Free Zone Person (QFZP) status — but only if you meet all the conditions. Here's what to check.
The headline: 9% CT applies from June 2023
UAE Corporate Tax at 9% applies to businesses with taxable income above AED 375,000. This applies to mainland and free zone companies alike — unless the free zone entity qualifies for Qualifying Free Zone Person (QFZP) status, which preserves the 0% rate on qualifying income.
Qualifying Free Zone Person criteria
To maintain QFZP status and 0% CT on qualifying income, a free zone company must: (1) maintain adequate substance in the free zone — real operations, physical presence, qualified employees; (2) derive qualifying income (transactions with other free zone persons or non-UAE customers — not mainland UAE transactions); (3) not elect out of the free zone tax regime; (4) prepare audited financial statements and comply with transfer pricing rules for related-party transactions.
What breaks QFZP status
The most common pitfall is deriving non-qualifying income — particularly from mainland UAE customers. If more than 5% of your revenue comes from mainland UAE transactions, you lose QFZP status for that tax period and pay 9% on all income. This catches many free zone companies by surprise, especially those providing services to Dubai mainland clients.
What to do now
Review your revenue mix. If you have mainland UAE clients, assess whether the volume triggers the non-qualifying threshold. Consider whether your business model is better served by a mainland licence instead of (or alongside) your free zone entity. Ensure your accounting is clean — the Federal Tax Authority will require audited financials from QFZP entities. StrataLink works with accredited tax advisors who can assess your specific situation.
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