Who really pays 0% Corporate Tax in the UAE?
In short
- The UAE rate is 9%. A 0% result is possible, but only through specific routes, each with conditions.
- Every company pays 0% on the first AED 375,000 of taxable income.
- Small businesses with revenue up to AED 3 million can elect Small Business Relief, now extended to tax periods ending by 31 December 2029.
- Free zone companies pay 0% only if they are a Qualifying Free Zone Person, and only on qualifying income. A free zone licence alone is not enough.
- Some persons are exempt, and individuals with business turnover up to AED 1 million are outside Corporate Tax.
Route 1: the AED 375,000 zero band (everyone)
Under the standard regime, taxable income up to AED 375,000 is taxed at 0%, and only the part above it at 9%. A mainland company with a taxable profit of AED 300,000 therefore pays no Corporate Tax, but it must still register, keep proper accounts and file a return.
Route 2: Small Business Relief (revenue up to AED 3 million)
A UAE resident business can elect to be treated as having no taxable income for a tax period if its revenue for that period and every previous period is AED 3 million or less.
- Extended: Ministerial Decision No. 131 of 2026 extended the relief from 2026 to tax periods ending on or before 31 December 2029.
- Must be elected in the Corporate Tax return, and the return must still be filed on time.
- Not available to Qualifying Free Zone Persons or to members of large multinational groups.
- Trade-off: in years you use the relief, tax losses and disallowed interest are not carried forward. If you are loss-making, electing may not be the best choice.
- No splitting: artificially dividing one business into several companies to stay under AED 3 million is treated as abuse and can lead to penalties.
Route 3: Qualifying Free Zone Person (0% on qualifying income)
This is where most misunderstandings happen. A free zone company pays 0% only if it meets all of these conditions:
| Condition | What it means in practice |
|---|---|
| Adequate substance | Real core activities in the free zone, with enough staff, premises and spending (outsourcing is possible with proper oversight) |
| Qualifying income | Income from qualifying activities (see below) with other free zone persons or foreign customers |
| De minimis test | Non-qualifying revenue no more than 5% of total revenue or AED 5 million, whichever is lower |
| Transfer pricing | Related-party transactions at arm’s length, with documentation |
| Audited financial statements | Required every year |
| No election for 9% | The company has not chosen to be taxed under the standard regime |
Qualifying activities (examples)
Under Ministerial Decision No. 229 of 2025, these include manufacturing and processing of goods, trading in qualifying commodities, holding shares and securities, ship operation and management, reinsurance, regulated fund and wealth management, headquarter and treasury services to related parties, aircraft financing and leasing, logistics services, distribution of goods in or from a Designated Zone, and activities ancillary to these.
What is taxed at 9% even in a free zone
- Most income from mainland customers
- Transactions with individuals (with narrow exceptions)
- Excluded activities such as regulated banking, most insurance, most finance and leasing, and certain real estate and intellectual property income (for example trademarks)
Route 4: exempt persons
Some entities are exempt by law, automatically or after applying to the FTA: government and government-controlled entities, extractive and non-extractive natural resource businesses, qualifying public benefit entities, qualifying investment funds, and public or private pension and social security funds, together with certain wholly owned subsidiaries.
Route 5: individuals with turnover up to AED 1 million
A freelancer or sole proprietor is only subject to Corporate Tax if turnover from business activities in the UAE exceeds AED 1 million in a calendar year. Salary, personal investment income and private real estate income are not counted towards that limit.
Large multinational groups: 15%, not 0%
Groups with consolidated revenue of EUR 750 million or more are subject to the UAE Domestic Minimum Top-up Tax from 2025. For them, a 0% free zone result is topped up to an effective 15%.
Quick self-check
| Your situation | Likely result |
|---|---|
| Mainland company, profit under AED 375,000 | 0% (must still register and file) |
| Any resident company, revenue up to AED 3 million | 0% if Small Business Relief is elected |
| Free zone company, only qualifying activities with foreign or free zone clients, real substance | 0% on qualifying income |
| Free zone company with significant mainland or individual clients | Often 9% on everything (de minimis failed) |
| Freelancer with UAE business turnover up to AED 1 million | Not subject to Corporate Tax |
| Group with revenue of EUR 750 million or more | Effective 15% |
How RAS for Tax Consultant can help
- A clear answer on which route applies to your company, and what it saves you
- Qualifying Free Zone Person review: activities, de minimis calculation and substance
- Small Business Relief: checking eligibility and whether electing makes sense
- Corporate Tax registration, returns and financial statements
- Restructuring advice before you lose a 0% status
Order a consultation
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This page is general information based on Federal Decree-Law No. 47 of 2022 on Corporate Tax and related decisions, including Ministerial Decisions No. 229 of 2025 and No. 131 of 2026, as understood on 11 October 2026. It is not tax advice for your specific situation; always check the official texts published by the Ministry of Finance and the Federal Tax Authority.