A UAE Free Zone company should not assume that every item of income is taxed at 0%. The preferential rate is available to a Qualifying Free Zone Person only on Qualifying Income and only while all relevant statutory conditions are met. Other taxable income may be subject to the ordinary Corporate Tax rules.
What needs to be tested
Review the entity’s legal status, qualifying activities, substance, audited financial statements, customer and counterparty types, transactions with mainland or overseas parties, excluded activities and the applicable de minimis conditions. Keep evidence of how each revenue stream is classified. Free Zone licensing or incorporation alone is not enough to determine the tax result.
Check the current decisions
The Ministry of Finance announced Ministerial Decision No. 229 of 2025, replacing the earlier decision on Qualifying and Excluded Activities and clarifying the scope of certain activities. The detailed rules can change, and the classification of a particular service or transaction requires a fact-specific assessment.
Before applying a 0% rate, map income by activity and counterparty, confirm the current Cabinet and Ministerial Decisions, and obtain professional review where needed. Do not use this general summary as confirmation that a particular company qualifies.
Sources: Ministry of Finance Corporate Tax overview and MoF update on Decision No. 229 of 2025.
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