UAE Corporate Tax Before You Incorporate

The sentence that costs founders the most money

"Free zone companies pay zero corporate tax."

It is what most founders believe on the day they incorporate, and for a large share of free zone companies it is false. The 0% rate exists, but it is narrow, conditional, self-assessed, and it does not attach to your licence — it attaches to particular kinds of income earned by a company that passes five separate tests every year.

This page explains the regime as it applies to a company that does not exist yet, because that is the only point at which the expensive decisions are still cheap. Almost everything below is harder to fix once your first tax period has closed. Once the company does exist, the obligations arrive in a fixed sequence, and what a startup needs to know about corporate tax takes them in that order.

What the tax is, and what it is charged on

UAE corporate tax was introduced by Federal Decree-Law No. 47 of 2022, applying to financial years beginning on or after 1 June 2023. It is a federal tax administered by the Federal Tax Authority, and no emirate or free zone authority has the power to exempt you from it.

The headline rates:

The 0% band runs to AED 375,000 of taxable income and the 9% applies to what sits above that line, per taxable person per tax period.

The AED 375,000 figure comes from Cabinet Decision No. 116 of 2022 and was confirmed by the Ministry of Finance. It applies per taxable person per tax period, regardless of how many business activities that person carries on.

AED of taxable incomeRate

0%9%

AED 375,000

1. 0 – AED 375,0000%The nil band, taken once per taxable person per tax period
2. Above AED 375,0009%Charged on taxable income above the line, on profit rather than on revenue

Two clarifications that matter more than they sound:

It is charged on profit, not revenue. The starting point is accounting profit under IFRS or IFRS for SMEs, adjusted by the rules in the Decree-Law — disallowed entertainment, interest limitation, non-deductible fines, exempt dividends, and so on. A company turning over AED 4 million with AED 300,000 of profit pays nothing.

Natural persons have a separate threshold. Under Cabinet Decision No. 49 of 2023, an individual is only within scope where turnover from business activities exceeds AED 1,000,000 in a Gregorian calendar year. Employment income, personal investment income and personal real estate investment income are outside the scope entirely, at any level. This is why sole traders and freelancers with a professional licence often have no corporate tax exposure at all — a point worth establishing before you incorporate a company you do not need. Where an individual does cross that threshold, the deadlines that follow are set by the calendar rather than by a licence date, and they are set out further down.

AED in one tax period, drawn on one shared scale

1. What arrived in the year
2. What this tax actually measures

1. A company turning over AED 4,000,000AED 4,000,000AED 300,000
2. A freelancer drawing AED 700,000 from a job and billing AED 600,000AED 1,300,000AED 600,000
3. A two-person free zone consultancy on Small Business ReliefAED 1,500,000AED 0

There is no personal income tax to catch what corporate tax leaves out. The UAE does not levy income tax on individuals, so a salary drawn here is untaxed whether a mainland company pays it or a free zone company does. That is why "no personal income tax" on a free zone brochure is true and has nothing to do with the zone — it describes the country. For an owner-manager, the consequence lands on the company's side of the ledger rather than yours: the salary you pay yourself is deductible only up to market value, under the connected-person rule set out below. How your home country treats the same salary is a separate question, answered in that jurisdiction rather than here.

Small Business Relief: the most valuable provision for a new company

If your UAE company is resident and its revenue stays at or below AED 3,000,000 in the relevant tax period and every previous one, you can elect Small Business Relief and be treated as having derived no taxable income for that period. Not a reduced rate. No taxable income, plus a materially lighter compliance load.

The relief comes from Ministerial Decision No. 73 of 2023. It was originally due to expire for tax periods ending after 31 December 2026 — and on 7 August 2026 the Ministry of Finance announced it had been extended to tax periods ending on or before 31 December 2029, by Ministerial Decision No. 131 of 2026, with the AED 3 million threshold unchanged. For a company forming today that is three more years of runway than most published guidance still reflects.

The conditions, and the trapdoors

• Revenue, not profit. AED 3 million of turnover, measured under applicable accounting standards.
• Once gone, gone. Exceed the threshold in any tax period and the relief is unavailable for that period and all subsequent ones. There is no returning to it after a good year.
• You must still enrol and still file. The election is made in the return. Small Business Relief is not an exemption from the system, it is an outcome within it.
• Not available to Qualifying Free Zone Persons, or to constituent companies of multinational groups with consolidated revenue above AED 3.15 billion.
• Splitting the business does not work. Artificially separating one business into several entities to stay under AED 3 million is caught by the general anti-abuse rule.
• You bank no losses. In a relief period you cannot generate carried-forward tax losses or disallowed net interest to use later. For a genuinely loss-making start-up that expects real profits in year three, not electing the relief can be worth more than electing it. Model both.

revenue, measured under applicable accounting standards

Revenue above the lineAbove AED 3,000,000The relief is unavailable for that period and all subsequent ones

AED 3,000,000revenue in this tax period and in every previous one

Revenue at or below the lineUp to AED 3,000,000Elect in the return and be treated as having derived no taxable income

The free zone question: what 0% actually requires

Free zone companies are not exempt. What Article 18 of the Decree-Law creates is a status — Qualifying Free Zone Person (QFZP) — which produces 0% on qualifying income and 9% on everything else. Critically, a QFZP does not get the AED 375,000 nil band on its non-qualifying income. The 9% starts at the first dirham.

The five conditions, all of which must hold

1. Adequate substance in the free zone. Real premises, real people, real core income-generating activity conducted in the zone. Outsourcing is permitted with supervision, but the activity cannot notionally happen at a flexi-desk nobody visits.
2. Qualifying income, as defined below.
3. No election into the standard regime. A free zone company may choose to be taxed normally, and sometimes should.
4. Arm's length pricing and transfer pricing documentation, per Article 34 and Article 55.
5. Audited financial statements. Under Ministerial Decision No. 84 of 2025, every QFZP must prepare audited financials regardless of revenue, while ordinary taxable persons only cross that requirement above AED 50 million.

Fail any one of them and QFZP status is lost from the start of that tax period and for the following four tax periods. Five years, from one breach. Read as a diagnostic for a company already inside a zone rather than as a choice before one, the same conditions are taken apart in are UAE free zone companies still tax free.

What counts as qualifying income

Cabinet Decision No. 100 of 2023 defines it as, broadly: income from transactions with other Free Zone Persons where they are the beneficial recipient; income from transactions with non-free-zone persons only where the activity is a Qualifying Activity; and income from qualifying intellectual property.

The Qualifying and Excluded Activity lists were rewritten by Ministerial Decision No. 229 of 2025, issued 3 September 2025, which repealed the earlier Decision No. 265 of 2023 retroactively to 1 June 2023. Qualifying Activities include manufacturing and processing of goods, trading of qualifying commodities, holding shares and securities for investment, ship operation, reinsurance, fund management, wealth and investment management, headquarter and treasury services to related parties, aircraft finance and leasing, logistics, and distribution of goods in or from a Designated Zone. MD 229 widened qualifying commodities to include industrial chemicals, associated by-products and environmental commodities such as carbon credits, and dropped the requirement that they be exchange-traded.

Excluded Activities include transactions with natural persons (with narrow carve-outs), banking, most insurance, most finance and leasing, immovable property other than commercial property in a free zone transacted with free zone persons, and intellectual property that is not qualifying IP.

Read those two lists against your actual revenue mix. Here is what most founders find when they do: a free zone consultancy, marketing agency, IT services firm or trading company selling to mainland UAE or overseas customers is earning non-qualifying income. General consultancy to a non-free-zone client is not on the Qualifying Activity list. The 0% headline that sold the licence does not apply to the business the licence was bought for.

one licence, two destinations, and the customer decides which

• A transaction with another Free Zone Person that is the beneficial recipientCabinet Decision No. 100 of 2023, whatever the activity
• A Qualifying Activity performed for a customer outside any free zoneManufacturing, logistics, fund management, treasury services to related parties
• Qualifying intellectual propertyThe third head of qualifying income, and the narrowest of the three
• Distribution of goods in or from a Designated ZoneConditional on the Agreed-Upon Procedures report under FTA Decision No. 6 of 2026

0% qualifying income

• General consultancy for a customer outside any free zoneNot on the MD 229 Qualifying Activity list, and no AED 375,000 nil band
• Anything on the Excluded Activity listBanking, most insurance, most finance and leasing, transactions with natural persons

9% from the first dirham

The de minimis is a cliff, not a slope

Non-qualifying revenue is tolerated only up to the lower of 5% of total revenue or AED 5,000,000 in a tax period. Below that line, QFZP status survives and the non-qualifying income is taxed at 9%. Above it, status is lost for five tax periods.

Below the lower of 5% of total revenue or AED 5,000,000 the status holds and the non-qualifying income is taxed at 9%; above that line it is gone for five tax periods. A company with AED 4 million of revenue has a de minimis allowance of AED 200,000. One unplanned mainland contract can end the regime for half a decade.

one status, five tests, every year

What it givesWhat it asks in return

1. The rate0% on qualifying income, under Article 189% from the first dirham on everything else, with no AED 375,000 nil band
2. Revenue ceilingNo ceiling at all on income taxed at 0%Small Business Relief, and its AED 3,000,000 ceiling, is closed to you
3. Selling outside the zoneNon-qualifying revenue tolerated to the lower of 5% of revenue or AED 5,000,000Above that line, status is lost for five tax periods
4. Presence in the zoneOutsourcing is permitted, with supervisionReal premises, real people and real core income-generating activity in the zone
5. Audited accountsAudited figures standing behind the 0% positionAudited statements at any revenue, not only above AED 50 million
6. Related-party pricingArm's length pricing, per Article 34 and Article 55Transfer pricing documentation at any size, as one of the five conditions
7. How the status is heldNobody issues a certificate; you take the position yourselfThe FTA can test it later, reaching back to the start of that tax period

New for 2026: free zone distributors need an auditor's report

FTA Decision No. 6 of 2026, issued 2 June 2026, applies to tax periods beginning on or after 1 January 2026. A QFZP relying on the qualifying activity of distributing goods or materials in or from a Designated Zone must now obtain an Agreed-Upon Procedures report from an independent UAE-licensed auditor, testing a prescribed sample of transactions to verify that customers are genuine resellers and that goods were imported through a Designated Zone. It is due within 30 days after the corporate tax return deadline. Miss it and the distribution condition is treated as not met — which puts the 0% on that income at risk.

If your model is buy-in-bulk, store in a Designated Zone, sell on, this is now an annual cost line and a records discipline, not a formality.

The free zone exemption that survived the reforms is on goods, not income

Everything above is about income. The free zone's older promise had a second half that none of it touches: customs. Under the GCC Common Customs Law, which the UAE applies, goods that enter a free zone are treated as outside the customs zone — for duty purposes, not yet in the country. Foreign goods can be brought in, held for as long as the business needs, and sent on abroad or to another free zone without customs duty. Duty falls due when goods leave the zone for the UAE local market, at the tariff in force on that day, and the goods are treated as foreign even where they incorporate local materials on which duty had already been paid.

For a business that holds, consolidates or re-exports stock, that is a real working-capital advantage. It also has three limits worth knowing before it drives a licensing decision.

• It applies to goods. A consultancy, agency or software house gets nothing from it, whatever the brochure implies.
• It says nothing about the profit. Goods can sit duty-free inside the zone while the income from selling them fails the qualifying income test above. Customs and corporate tax are decided under different laws, by different authorities, on different facts.
• A sale to the mainland engages both at once. The goods take on duty as they leave the zone, and the income from the sale goes through the qualifying income test above — which, for a distributor, usually turns on the Designated Zone distribution activity and the auditor's report that now comes with it.

The other line from the old brochure that still holds, no personal income tax, is true and has nothing to do with the zone, as set out near the top of this page. Which free zone benefits survived the reforms sorts the rest of the brochure by where each benefit actually comes from, and customs codes and moving goods after the trade licence covers the declarations the duty position depends on.

QFZP or Small Business Relief? A real choice, and usually a lopsided one

Because Small Business Relief is unavailable to a QFZP but is available to a free zone company that is not a QFZP, a small free zone business has a genuine election to make.

For a two-person free zone consultancy billing AED 1.5 million to overseas clients, QFZP status delivers close to nothing — most of that revenue is non-qualifying and would face 9% — while Small Business Relief delivers zero tax and no audit requirement. The election is made in the return, so it is revisited annually, but the substance, premises and bookkeeping decisions that make either route defensible are made at formation.

one election, made inside the return, revisited every year

1. 01Count the revenue for this period and every previous oneAt or below AED 3,000,000 keeps Small Business Relief in reach
2. 02Sort the revenue by customer and by activityFree zone recipients on one side, the MD 229 Qualifying Activity lists on the other
3. Does most of the revenue pass the qualifying income test
4. Most of it qualifiesQualifying Free Zone Person: 0% on that income, no revenue ceiling, audited statements at any size
5. Most of it does notSmall Business Relief: no taxable income at all, and no audit requirement on that basis
6. Model both for three years, not oneA Qualifying Free Zone Person cannot elect the relief, so this is one choice and not two

Enrolling, filing and the calendar

The first tax period

Your first tax period is your first financial year beginning on or after 1 June 2023, and it can run 6 to 18 months. Choosing the financial year end at incorporation quietly sets every deadline that follows, and choosing badly can pull your first return forward by months. How to choose it, and what each date costs, is worked through in choosing your first financial year end.

Enrolment with the FTA

FTA Decision No. 3 of 2024, effective 1 March 2024, sets the timelines. Companies incorporated on or after 1 March 2024 must submit an application to enrol for corporate tax within three months of incorporation. Entities that existed earlier had deadlines keyed to the month their licence was first issued. Enrolment is through EmaraTax and is required whether or not tax will ever be payable — including by companies claiming Small Business Relief and by QFZPs expecting 0%.

The application is assembled from documents a new company already holds, not from accounts it does not yet have. The FTA's own service card lists them: the certificate of incorporation, memorandum of association or partnership agreement, where the entity has one; the certificate or other official document issued by the licensing authority; the valid trade licence, branch licences included; the Emirates ID and passport of every owner holding more than 25% and of each authorised signatory; and proof that the signatory is authorised to act. Financial statements are not on the list, and nor is any evidence of the business activity beyond the licence itself. The FTA charges no fee for the application and publishes a processing time of 20 business days from a complete one. What the three-month deadline measures is the submission, not the approval — so the FTA's queue does not eat into your window, but the time spent chasing a signatory's passport or a power of attorney does.

Failure to apply carries an administrative penalty of AED 10,000. The FTA's Public Clarification CTP006 set out a waiver: where the first corporate tax return (or annual declaration, for certain exempt persons) is filed within seven months of the end of the first tax period, the penalty is waived, and if already paid, credited. If you are late, that seven-month window is the thing to chase — confirm it is still open before relying on it.

A foreign company's clock starts at a different event

The three-month rule assumes a company incorporated in the UAE. A company incorporated abroad can also end up needing to enrol here, and FTA Decision No. 3 of 2024 starts its clock at a different event depending on why. Set beside the company and individual clocks covered elsewhere on this page, the deadlines for anyone who becomes taxable on or after 1 March 2024 are these:

Three months is the common answer and it is measured from different events. A permanent establishment gets six months from the day it comes into existence, and a resident individual's application is due by 31 March of the year after business turnover passes AED 1 million.

Who must apply	What starts the clock	How long it runs
A company incorporated in the UAE on or after 1 March 2024	Incorporation	Three months
A foreign company trading through a branch, office or place of management	The permanent establishment coming into existence	Six months
A foreign company earning from immovable property in the UAE	The nexus being established	Three months
A foreign company effectively managed and controlled from the UAE	The end of its financial year	Three months
A resident individual whose business turnover passes AED 1,000,000	The close of that Gregorian calendar year	By 31 March of the next year
A non-resident individual carrying on business in the UAE	The date the taxable-person requirements are met	Three months

Entities that already existed on 1 March 2024 had a separate set of deadlines under the same Decision, and every one of them has passed. One that existed then and never applied is late, and in the penalty position described above.

A branch is a permanent establishment, and it gets six months. A foreign company trading here through a fixed place — a licensed branch, an office, a factory, a place of management — has a permanent establishment in the UAE, and so does one whose agent here habitually concludes contracts on its behalf. The taxable person is the foreign company itself, on the income attributable to that establishment. A place used only for preparatory or auxiliary work, such as storing or delivering goods or gathering information, does not create one on its own, subject to a rule that stops a business being split into pieces to stay inside that exclusion. Note what the six months run from: the permanent establishment coming into existence, which is a question of fact rather than of licensing — an agent can create one without any licence being issued. How the branch's profit is then measured, and why a branch carries its parent's full liability, is set out in our guide to opening a UAE branch of your existing company.

A foreign company earning from UAE property has a nexus, and three months. Under Cabinet Decision No. 56 of 2023, a non-resident company whose income arises from immovable property in the UAE has a nexus here, and is a taxable person on that income even with no branch, no staff and no licence in the country. The usual case is a holding company abroad that owns a Dubai apartment or warehouse and lets it. Its application is due within three months of the nexus being established — a date to pin down at acquisition, with an adviser, rather than to reconstruct after a year of rent has been banked.

A foreign company run from here is a UAE resident, and its clock starts at year end. Corporate tax treats a company incorporated abroad as a UAE Resident Person when it is effectively managed and controlled here — judged largely by where the key management and commercial decisions on strategy and policy are regularly and predominantly made. The FTA's own indicators include board meetings held in the UAE and board members resident here. The deadline is three months after the end of the company's financial year, the only company row in the table that runs from the end of a period rather than the start of a presence — which fits the test, since where a company was run from is judged across the year it was run. It is also the mirror image of the home-country risk set out below under where the regime bites. A founder who moves to Dubai and goes on running a company incorporated in London or Toronto from here can make that company UAE-resident without forming anything in the UAE, while the home jurisdiction may go on claiming it too. The FTA's position is that dual residence of that kind is resolved under a double tax agreement, which helps only where one exists. Settle which country the company belongs to before the move, not after its first year end here.

Filing and payment

Returns are filed and tax paid within nine months of the end of the tax period, through EmaraTax. A 31 December 2025 year end means 30 September 2026. There is no paper alternative and no separate payment deadline — filing and settlement fall on the same date.

Late filing penalties are widely cited at AED 500 per month for the first twelve months and AED 1,000 per month thereafter, under Cabinet Decision No. 75 of 2023 as amended. Treat these as indicative and verify the current schedule; the FTA has amended the penalty regime more than once.

The operating calendar that follows all this, VAT included, sits on our VAT and corporate tax compliance page rather than here.

Read down that calendar and the dependency is the point: the financial year end you pick on the day you incorporate is what fixes every date after it.

how long each clock runs, from the event that starts it

1. The first tax period6 to 18 monthsYour first financial year beginning on or after 1 June 2023
2. Enrolment with the FTA3 monthsIncorporation, for a company incorporated on or after 1 March 2024
3. The return and the payment9 monthsThe end of the tax period, so a 31 December 2025 year end means 30 September 2026
4. The penalty-waiver window under CTP0067 monthsThe end of the first tax period, if the first return is filed inside it
5. The Agreed-Upon Procedures report for a Designated Zone distributor30 daysThe corporate tax return deadline

An individual's deadline is fixed by the calendar year, not by a licence date

That sequence belongs to a company. A natural person trading in their own name — a freelance permit holder, a professional licence issued to an individual, a sole establishment — runs on a different clock, and it is not one they get to choose. The tax period of a natural person is the Gregorian calendar year. There is no financial year end to select at formation, because there was no formation.

That changes what the obligation attaches to. Under FTA Decision No. 3 of 2024, a natural person carrying on a business or business activity in the UAE whose turnover from that activity exceeds AED 1,000,000 in a Gregorian calendar year must submit an application to enrol for corporate tax by 31 March of the calendar year following the one in which the threshold was crossed. The FTA's own worked example runs like this: turnover passing AED 1 million at any point during a calendar year gives an application deadline of 31 March in the next year, and a first return due 30 September of that same next year — nine months after the calendar year closed.

So the individual carries two dates, six months apart, inside one year. The March one is the one people miss, because nothing visible happens on it and no authority sends a reminder. Missing it carries the same AED 10,000 administrative penalty a late company pays.

A non-resident natural person carrying on business in the UAE is on a different footing again: three months from the date the requirements of being a taxable person are met, rather than a fixed March date. Residence here is a tax classification, not a description of where somebody sleeps, so it is worth having established rather than assumed.

Four consequences are worth taking on before you decide whether to incorporate at all.

The trigger is retrospective and the paperwork is not. You do not know on 1 January whether you will cross AED 1 million that year. You know on 31 December, and by then the deadline is three months away. A freelancer who has never kept a running turnover figure discovers in February that they needed one in January, and has to reconstruct twelve months of invoices to find out whether an obligation exists at all.

A salary does not push you over the line. The AED 1 million test measures turnover from business or business activity. Employment income, personal investment income and personal real estate investment income sit outside the scope of the tax entirely under Cabinet Decision No. 49 of 2023, so they do not count towards it. Someone drawing AED 700,000 from a job and billing AED 600,000 of consultancy work is at AED 600,000 for this purpose, not AED 1.3 million — and is below the threshold.

Incorporating later does not clear the year already run. Turnover earned personally before a company existed stays personal turnover. Cross the threshold in one calendar year, form a company the following spring, and the individual deadline still applies to the year that has closed — while the new company starts a separate three-month clock of its own from the date of incorporation. Two obligations, two deadlines, one person.

Crossing the line creates a filing obligation, not automatically a bill. The AED 1 million test decides whether you are a taxable person. It does not decide what you owe, and the two are routinely confused by people who then either panic or ignore the date entirely. A natural person's taxable income still gets the AED 375,000 nil band, and a natural person who is a Resident Person can elect Small Business Relief on the same terms a company gets it — revenue at or below AED 3,000,000 in this tax period and in every previous one, with the election made inside the return rather than applied for separately. A freelancer billing AED 1.4 million therefore has a real March deadline, a real September return, and, on those numbers, nothing to pay. What missing the date actually costs is the AED 10,000 penalty and the work of reconstructing a year of invoices under time pressure — not the tax, because there may be no tax.

That is the shape of the individual regime in one line: the obligations arrive at AED 1 million and the money arrives much later, if at all. It is also why the comparison with a company is closer than most founders assume. The nil band is the same, the relief is the same, the nine-month filing window is the same. What differs is that an individual cannot choose the year end, cannot elect into Qualifying Free Zone Person status, and cannot spread a decision across a corporate structure — and, on the other side, carries no licence fee, no audit and no substance test.

For an individual whose billings sit below AED 1 million and whose customers are overseas, the honest answer is often that a company adds a licence fee, a bank account, bookkeeping and an audit trail without changing the tax outcome by a dirham. That comparison is worth running before the licence is bought, not after the first March deadline has gone past.

A natural person and an ordinary company both get the AED 375,000 nil band and can elect the relief up to AED 3,000,000; a Qualifying Free Zone Person gets neither, and pays 9% from the first dirham on income that is not qualifying.

the same seven tests, three standings

Judged on	An ordinary UAE company	A Qualifying Free Zone Person	A natural person trading in their own name
The AED 375,000 nil band	yes	no	yes
Small Business Relief up to AED 3,000,000	yes	no	yes
0% on qualifying income	no	yes	no
Audited financial statements at any revenue	no	yes	no
Transfer pricing documentation whatever the size	no	yes	no
A financial year end you choose yourself	yes	yes	no
Nine months from period end to file and pay	yes	yes	yes

Transfer pricing is not only a multinational problem

Article 34 requires that transactions with Related Parties and Connected Persons be priced at arm's length. That obligation applies to every taxable person, with no size threshold whatsoever.

What has a threshold is documentation. Under Ministerial Decision No. 97 of 2023, a master file and local file are required only where the taxable person's revenue is AED 200 million or more, or the entity belongs to a multinational group with consolidated revenue of AED 3.15 billion or more. Almost no new company reaches either.

Founders then conclude transfer pricing is irrelevant to them. It is not, for two reasons.

Connected Persons. These are your owners, directors and officers and their relatives. Payments to them — director's salary, management fees, a founder's remuneration — are deductible only up to market value for the service actually performed. An owner-manager paying themselves an arbitrary figure to strip out profit is the single most common transfer pricing exposure in small UAE companies, and it does not need a multinational group to exist.

The disclosure schedule in the return. Current FTA guidance requires related-party transactions to be disclosed where the aggregate exceeds AED 40 million, reporting categories above AED 4 million, and connected-person transactions where the aggregate exceeds AED 500,000. That last figure is low enough to catch ordinary owner-managed businesses. These thresholds live in guidance rather than the Decree-Law, so confirm them against the current return schema before filing.

Set beside each other the three lines are AED 40 million for related-party transactions in aggregate, AED 4 million for any one reporting category, and AED 500,000 for connected-person transactions in aggregate — and it is the smallest of the three that an owner-managed company meets first.

What has to be disclosedAED, aggregate in one tax periodWho it reaches

1. Related-party transactions, in aggregateAED 40,000,000Disclosed in the return, under current FTA guidance
2. Any one reporting categoryAED 4,000,000A category line inside the related-party disclosure
3. Connected-person transactions, in aggregateAED 500,000Low enough to catch ordinary owner-managed businesses

020m40mAED, aggregate in one tax period

For a QFZP, transfer pricing compliance is not optional at any size — it is one of the five conditions.

The 15% layer above all of this

Cabinet Decision No. 142 of 2024 introduced a Domestic Minimum Top-up Tax of 15%, effective for financial years beginning on or after 1 January 2025, for UAE entities of multinational groups with consolidated revenue of EUR 750 million or more in at least two of the four preceding fiscal years. It aligns the UAE with the OECD Pillar Two rules and, where it applies, it overrides the comfort of both the 9% rate and free zone 0%.

If you are forming a UAE subsidiary of a large international group, this is the first question, not the last — and the free zone 0% you were shown in a package brochure may be worth nothing to you.

eight duties, four instruments, and the size at which each one switches on

Ministerial Decision No. 84 of 2025

• Audited accounts at any revenueEvery Qualifying Free Zone Person, whatever the turnover
• Audited accounts above AED 50 millionAn ordinary taxable person, only once revenue passes that line

Ministerial Decision No. 73 of 2023

• Small Business Relief closesRevenue above AED 3,000,000, for that period and every one after it
• The relief never opens at allA Qualifying Free Zone Person, which cannot elect it at any revenue
• The relief closes through the groupA constituent company of a multinational group with consolidated revenue above AED 3.15 billion

Ministerial Decision No. 97 of 2023

• A master file and a local fileRevenue of AED 200 million or more
• The same two files through the groupA multinational group with consolidated revenue of AED 3.15 billion or more

Cabinet Decision No. 142 of 2024

• The 15% Domestic Minimum Top-up TaxA multinational group with consolidated revenue of EUR 750 million or more, and it overrides both the 9% and the free zone 0%

Where the regime bites, and where the advice fails

We would rather you read this before incorporating than after your first assessment.

The 0% is oversold, systematically. Most free zone service businesses selling to non-free-zone customers earn little or no qualifying income. If a consultant tells you a free zone licence means 0% without asking who your customers are and what activity you perform, they are describing a brochure, not the law.

QFZP status is self-assessed, and reviewable years later. Nobody issues you a certificate. You take the position in your return, and the FTA can test it afterwards. A failed test reaches back to the start of that tax period and forward four more.

A free zone's "50-year tax holiday" is not a corporate tax exemption. That language predates the federal regime and comes from the zone's founding decree. Article 18 is the only route to 0%, and a free zone authority cannot widen it.

MD 229 of 2025 applies retroactively to 1 June 2023. Any analysis done before September 2025 was performed against a repealed list. Positions taken in your first two returns may now be wrong in either direction — some businesses gained qualifying status, some lost it.

The audit requirement makes QFZP uneconomic for micro-businesses. Every QFZP needs audited financial statements regardless of revenue. On a company with AED 800,000 of turnover, the audit fee, transfer pricing file and substance costs can exceed the tax the status was meant to save.

Small Business Relief is a runway, not a destination. It ends for tax periods ending after 31 December 2029, and it ends permanently for you the first time revenue touches AED 3 million. The structure you will need in 2030 should inform the one you build now.

Your home country may tax you anyway. This is the failure mode nobody selling a licence mentions. A UAE company controlled and managed from London, Berlin, Mumbai or Toronto can be treated as tax resident there under place-of-effective-management rules, or caught by controlled foreign company legislation, regardless of what the UAE charges. A UAE tax residency certificate for the company does not resolve your personal position. Get advice in both jurisdictions before you build a structure around a 9% headline.

Substance is a cost, not a checkbox. If the 0% depends on real activity in the zone, then premises, staff and decision-making must genuinely be there. A cheap flexi-desk that supports the licence does not necessarily support the tax position, and the two are assessed by different authorities with different standards of proof.

Several of those failures share one cause. This regime is young, the instruments under it have not stopped arriving, and one of them was written backwards into years that had already been filed.

Corporate tax began for financial years starting on or after 1 June 2023, the enrolment timeline took effect on 1 March 2024 and the 15% top-up tax on 1 January 2025; the qualifying activity lists were rewritten on 3 September 2025 back to 1 June 2023, FTA Decision No. 6 of 2026 arrived on 2 June 2026, and Small Business Relief was extended on 7 August 2026 to tax periods ending on or before 31 December 2029.

the gaps are the argument: nothing here has settled

1. 1 June 2023Federal Decree-Law No. 47 of 2022 bitesCorporate tax reaches financial years beginning on or after this date
2. 1 March 2024FTA Decision No. 3 of 2024The enrolment clock starts; a new company gets three months from incorporation
3. 1 January 2025Cabinet Decision No. 142 of 2024The 15% Domestic Minimum Top-up Tax reaches large multinational groups
4. 3 September 2025Ministerial Decision No. 229 of 2025The qualifying activity lists rewritten, retroactively to 1 June 2023
5. 2 June 2026FTA Decision No. 6 of 2026Designated Zone distributors owe an Agreed-Upon Procedures report
6. 7 August 2026Ministerial Decision No. 131 of 2026Small Business Relief extended to periods ending on or before 31 December 2029

What to settle before you incorporate

• Who your customers will be — free zone, mainland, or overseas. This determines qualifying income before anything else does.
• Which activity you actually perform, matched line by line against the MD 229 lists rather than against your licence category.
• Your financial year end, because it fixes every deadline that follows.
• QFZP versus Small Business Relief for the first three years, modelled with the audit and compliance costs included on the QFZP side.
• Your own tax residency, and whether your home jurisdiction will look through the structure.
• Whether a foreign company is in the picture. A branch of one, a foreign company earning from UAE property and a foreign company run from here each start the enrolment clock at a different event from a UAE company's incorporation. Diarise the right one on the day it starts.
• Whether you need a company at all. If the billings are personal, the individual regime carries the same AED 375,000 nil band and the same Small Business Relief up to AED 3 million, with none of the audit and substance cost a Qualifying Free Zone Person takes on — against which it sets a March deadline you do not get to move and a year end you do not get to choose.
• Bookkeeping from day one. Every relief here depends on records you either kept or did not. Reconstructing a year of transactions in month eight is how good positions get lost.

Nothing on this page is a substitute for advice on your own facts, and no figure here should be relied on without checking it against the source cited. Rules in this regime have already changed retroactively once.

Tell us the activity, the customer mix, the expected revenue and where you are personally tax resident, and our tax and financial advisory team will tell you which regime you actually land in — including when the honest answer is that the free zone 0% you were promised is worth nothing to your business.

Frequently asked questions