UAE corporate tax applies to every company in the country, including free zone businesses. This guide explains the standard rates, the Qualifying Free Zone Person (QFZP) rules and what RAKEZ founders need to do to stay compliant in plain English.
Key takeaways:
These rates come from Federal Decree-Law No. 47 of 2022 and apply to all UAE companies, including free zone entities. The AED 375,000 threshold is assessed per tax period, not per invoice.
A QFZP is a free zone company that passes a set of substance and income tests. If your RAKEZ company qualifies, it pays 0% corporate tax on Qualifying Income and 9% only on non-qualifying income. Below are the main requirements.
Maintain adequate employees, premises and operating expenditure in the free zone. You must be more than a mailbox company.
Generate enough revenue from Qualifying Activities and connected transactions. Non-qualifying revenue must stay within de minimis limits.
Do not elect to be taxed at the standard 9% rate. Once the QFZP conditions are met, the 0% rate applies automatically to qualifying income.
Transactions with related parties must be at arm’s length and supported by transfer pricing documentation where required.
Prepare audited financial statements for the tax period. This is mandatory for claiming the QFZP 0% rate.
Non-qualifying revenue must be the lower of AED 5 million or 5% of total revenue.
A RAKEZ trading firm buys goods in a Designated Zone and sells to GCC customers. Income from qualifying distribution and logistics activities is likely Qualifying Income. Any mainland-only sales above the de minimis threshold would be taxed at 9%.
A RAKEZ management consultancy with clients in Europe and free zone customers may treat that revenue as Qualifying Income if substance is maintained. Advisory work for mainland UAE clients may fall outside the qualifying bucket.
A manufacturer in Al Ghail or Al Hulaila Industrial Zone producing goods for export is a classic Qualifying Activity. Most profits can qualify for 0% corporate tax if audited financials and substance requirements are met.
RAKEFZ helps you choose the right RAKEZ package, structure shareholders correctly and prepare the documents you will need for FTA registration and audited financials.
We coordinate bookkeeping, audited accounts, corporate tax filings and annual renewals so you meet the QFZP substance and filing requirements without missing deadlines.