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UAE corporate tax: what a free zone licence does and does not change

Corporate tax is 0% up to AED 375,000 and 9% above it; free zone companies pay 0% only on qualifying income, and only while they meet the conditions.

Where
EU ↔ GCC · GCC ↔ Africa · India ↔ GCC · United Arab Emirates
Published
Last reviewed
Prepared
Prepared by the Intelligence desk with AI-assisted research from the cited sources, checked on 12 November 2026.
Effective
1 June 2023
Version
1

What changed

Under Federal Decree-Law No. 47 of 2022 and Cabinet Decision 116 of 2022, UAE corporate tax is 0% on taxable income up to AED 375,000 and 9% above that threshold. A Qualifying Free Zone Person pays 0% on qualifying income and 9% on other income, provided it meets the conditions, including substance and de minimis tests.

Who is affected

Companies using or considering a UAE free zone entity, especially those selling into the UAE mainland or earning mixed income.

Why it matters

A free zone licence does not by itself mean a 0% tax rate. A company that earns non-qualifying income above the de minimis limit can lose qualifying status for the whole tax period, which changes the economics of a free zone structure.

What to examine next

Classify expected income as qualifying or non-qualifying.
Check substance in the free zone: staff, premises and core activities.
Review mainland sales routes and their tax effect.
Compare routes in the Gulf regional base Decision Map.

Sources

  1. Cabinet Decision on the taxable income threshold for Corporate TaxUAE Ministry of Finance · published 12 Nov 2026 · checked 12 Nov 2026 · secondary source
  2. New decisions relating to Corporate Tax for Free ZonesUAE Ministry of Finance · published 12 Nov 2026 · checked 12 Nov 2026 · secondary source

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Original analysis by the UNBOUNDED Intelligence desk. Linked sources belong to their publishers. This briefing is information, not legal, tax, investment or other professional advice. Its appearance here is not an endorsement by UNBOUNDED or any institution of a transaction, jurisdiction, strategy or counterparty.