UAE free zone tax in 2026: what is actually true
By Malik, Founder · Prices checked
Zero tax sells well, and it is not what the law says. Nine rules decide what you actually pay, and none of them depends on which free zone you pick.
1
Corporate tax is 0 percent up to 375 000 dirhams of taxable income and 9 percent above.source
2
A free zone company is at 0 percent only if it qualifies as a Qualifying Free Zone Person. Any other free zone company follows the common regime, exactly like a mainland company.source
3
The 0 percent free zone regime requires five cumulative conditions, including adequate substance and audited accounts. Failing one loses the status for five years.source
4
Non qualifying income must stay under the lower of 5 percent of turnover or 5 million dirhams.source
5
Small Business Relief treats a business with revenue of 3 million dirhams or less as having no taxable income. It is elected for each tax period, it runs to periods ending on or before 31 December 2029, and a Qualifying Free Zone Person cannot elect it.source
6
VAT is 5 percent. Registration is compulsory above 375 000 dirhams of taxable supplies, voluntary from 187 500.source
7
Economic substance regulations no longer apply to financial years opened from 1 January 2023. A substance test remains, but under corporate tax law.source
8
A 15 percent domestic minimum top-up tax applies from 1 January 2025 to groups with 750 million euros of consolidated turnover. It overrides the free zone 0 percent.source
9
Since Dubai Executive Council Resolution 11 of 2025, applied from October 2025, any Dubai free zone company can serve the local market through a Department of Economy and Tourism branch licence, 10 000 dirhams a year with no extra mainland premises, or a 5 000 dirham permit for six months. Separate accounts are compulsory for that activity.source
10
A dual licence does not cost you the 0 percent rate on everything. Cabinet Decision 100 of 2023 taxes only the profit attributable to the domestic permanent establishment at 9 percent, and excludes that income from the de minimis test, so the free zone status survives. Transfer pricing applies between the two.source
11
A free zone company can sell on the mainland, but profits from a domestic permanent establishment are taxed at 9 percent with no 375 000 dirham band.source
None of these nine rules depends on which free zone you choose. Corporate tax and value added tax are federal.
Questions
Is a UAE free zone company really taxed at zero?
Not automatically. Corporate tax is zero up to a threshold of taxable income and nine percent above it, and a free zone company only keeps a zero rate on income that qualifies. The zone you choose does not change that.
Does the free zone I choose change my tax?
No. Corporate tax and value added tax are federal. A zone can differ on its licence price, its visa quota and its workspace rules, not on the tax law that applies to you.
Where do these rules come from?
Each one is printed here with the official page it was read on, ministry or federal authority. None of them is our interpretation, and every source is one click away.
