UAE corporate tax framework and free zone compliance

The United Arab Emirates applies a progressive corporate tax model to mainland and free zone businesses. Under Federal Decree-Law No. 47 of 2022, a 0% tax rate applies to taxable profits up to AED 375,000, while a 9% rate is applied to profits exceeding this threshold.

To benefit from a 0% rate on qualifying income, entities in free zones must maintain Qualifying Free Zone Person (QFZP) status. This status requires meeting cumulative conditions, including maintaining adequate economic substance through physical office space and local qualified employees, adhering to transfer pricing rules, and ensuring non-qualifying income remains within a specific de minimis limit.

For sole proprietorships and freelancers, those with gross annual revenues of AED 1,000,000 or less are generally out of scope, while those exceeding this amount are subject to the standard progressive tax rates.