I Run a Free Zone Business in Dubai — How Does Corporate Tax Actually Affect My Profit?

This is the question we get most from Free Zone founders, and the honest answer is: it depends on what kind of income you’re earning, not just where your license is issued.

Free Zone companies can qualify for a continued 0% Corporate Tax rate — but only on Qualifying Income, and only if the company meets the conditions to be a Qualifying Free Zone Person (QFZP). Broadly, that means:

• Keeping adequate substance in the Free Zone (real operations, not just a licence on paper)
• Earning income from activities the Ministry of Finance defines as “Qualifying Activities”
• Staying under the de minimis limit for non-qualifying income — whichever is lower of AED 5 million or 5% of total revenue
• Maintaining audited financial statements and transfer pricing documentation

Income that falls outside these conditions — most commonly, income from excluded activities or income that breaches the de minimis cap — is taxed at the standard 9% rate, exactly like a mainland company.

In practice, this catches out Free Zone trading companies and service businesses that deal heavily with mainland clients. The Free Zone address on the licence doesn’t change how the income itself is classified.

The only reliable way to know your real exposure is to review your income by source and counterparty, not just look at your trade licence. We do this as a standalone exercise for Free Zone clients before filing season, precisely because the QFZP calculation punishes surprises.