Application of UAE Corporate Tax for Free Zones

The UAE Corporate Tax, which is 9%, applies not only to mainland businesses, but also to all of the free zones, across the country.

However, qualifying free zone persons can be subject to a corporate tax rate of 0%. 

This is as long as the free zone entity meets the following criteria: 

1. The free zone person derives qualifying income; 
2. The free zone persons maintain adequate substance in the U.A.E.  Which means – conduct their core income-generating activities, maintains adequate assets, employees and expenditure, etc.
3. Or, the free zone person did not choose to subject itself to the 9% corporate tax rate; and
4. If the free zone entity is a multinational company, it must 1) adhere to the arm’s length principle and 2) maintain adequate transfer pricing standards and documentation.

This is as per Articles 18, 34, and 55 of Federal Decree-Law No. 47 of 2022 regarding Corporate Tax Law,as well as Articles 3 and 7 of Cabinet Decision No. 55 of 2023 regarding the Qualifying Income of Qualifying Free Zone Entities.