How are free zone businesses treated for Corporate Tax?
Free zone businesses may qualify for 0% Corporate Tax rate on qualifying income, provided they meet specific conditions including substance requirements and do not conduct business with UAE mainland.
Free zone businesses receive special treatment under UAE Corporate Tax law:
Qualifying Free Zone Person
- Licensed and operating in a designated free zone
- Maintains adequate substance in the UAE
- Derives only qualifying income
- Meets all regulatory requirements
Qualifying Income (0% Rate)
- Income from transactions with other free zone persons
- Income from transactions with foreign persons
- Income from certain UAE mainland transactions (limited)
- Investment income and capital gains
Non-Qualifying Income (9% Rate)
- Income from UAE mainland business
- Income from UAE resident persons
- Real estate income in UAE mainland
- Domestic transportation services
Substance Requirements
- Adequate number of qualified employees
- Adequate operating expenditure
- Physical presence in the free zone
- Core income-generating activities conducted in UAE
