Corporate Tax in Dubai 2026: 9%, 0%, and QFZP Rules

Last updated: April 2026

Corporate tax in Dubai: what freezone companies actually owe in 2026

Dubai is no longer a blanket zero-tax jurisdiction. Since June 1, 2023, UAE corporate tax applies to most businesses incorporated in the UAE — mainland and freezone alike. The 0% freezone exemption is real, but it is conditional. It requires meeting seven specific criteria every single tax period. Miss one, and you owe 9% — potentially for five consecutive years.

This guide covers the full picture: the standard rates, the Qualifying Free Zone Person (QFZP) exemption and its conditions, which income qualifies and which doesn't, the Small Business Relief deadline approaching at year-end, and what happens if your freezone company loses QFZP status.

By the end, you'll know exactly which rate applies to your situation and what you need to do before December 31, 2026.

UAE corporate tax: the basics

The UAE Corporate Tax Law was enacted as Federal Decree-Law No. 47 of 2022 and became effective June 1, 2023. It applies to all juridical persons incorporated in the UAE, foreign entities with a permanent establishment in the UAE, and individuals holding a trade license who conduct business in the UAE.

0% on taxable income up to AED 375,000

The 0% band applies to every registered taxpayer — mainland companies, freezone companies, and sole traders with a trade license. Taxable income up to AED 375,000 (approximately USD 102,000) is not taxed. This threshold applies to the first slice of income, not the full amount.

AED 375,000 sounds like a meaningful buffer, but most operating businesses — even small freezone setups — exceed it within their first or second year. It is not a threshold that protects the majority of active companies.

9% on taxable income above AED 375,000

The standard UAE corporate tax rate is 9%, applied only to taxable income above the AED 375,000 threshold. The tax is calculated on the excess, not on total income.

Example: A company with AED 2,000,000 in taxable income pays corporate tax on AED 1,625,000 × 9% = AED 146,250 — not 9% of the full AED 2,000,000.

Who is subject to UAE corporate tax

The following persons are within scope:

• All juridical persons incorporated or registered in the UAE (mainland and freezone entities)
• Foreign entities that have a permanent establishment in the UAE
• Natural persons conducting business in the UAE under a trade license

The following are exempt from corporate tax: natural resource extraction companies (taxed at emirate level), UAE government entities, public benefit organizations, qualifying investment funds meeting specific regulatory criteria, and pension and social security funds.

Freezone companies: the 0% QFZP exemption explained

Freezone companies are subject to UAE corporate tax in the same way as mainland companies. The difference is that a freezone company that qualifies as a Qualifying Free Zone Person (QFZP) pays 0% on its qualifying income. The 0% rate is a structured exemption — not a default status granted by freezone registration.

The 7 conditions to qualify as a QFZP

To maintain QFZP status, a freezone company must satisfy all seven conditions simultaneously in every tax period. There is no grace period for partial compliance. Five conditions are statutory (Article 18 of the Corporate Tax Law); two are ministerial requirements introduced by subsequent decisions.

All seven conditions must be met in every tax period. Failure in a single period — even a minor technical breach — triggers loss of QFZP status for that year and the four years that follow.

Qualifying income — what is taxed at 0%

The current operative framework for qualifying income is Ministerial Decision No. 229 of 2025, which replaced MD 265 of 2023 with effect from August 28, 2025, and applies retroactively from June 1, 2023. Any analysis based on MD 265 of 2023 is now outdated.

Qualifying income includes income earned from the following sources and activities:

• Transactions with other freezone persons conducting any qualifying activity
• Transactions with foreign (non-UAE) persons in respect of qualifying activities
• Income from qualifying intellectual property — patents, copyrights, and software developed inside the freezone
• Manufacturing and processing of goods and materials
• Trading in qualifying commodities on recognised exchanges: metals, minerals, energy products, agricultural commodities, industrial chemicals, and carbon credits
• Logistics and distribution services from or within Designated Zones
• Fund management and wealth management (regulated activities)
• Reinsurance services (regulated)
• Headquarter services provided to related parties
• Treasury and financing services (to related parties or on own account)
• Ship and aircraft leasing and financing (regulated)
• Ancillary activities directly connected to any of the above qualifying activities

Non-qualifying income — what is taxed at 9%

Non-qualifying income does not benefit from the QFZP exemption. If non-qualifying income exceeds the de minimis threshold (see below), QFZP status is lost entirely for that tax period, and all income — including previously qualifying income — becomes taxable at 9%.

Non-qualifying income includes:

• Revenue from mainland UAE entities (individuals or companies) — in most cases
• Direct sales to UAE consumers (natural persons resident in the UAE)
• Banking and regulated insurance activities (reinsurance is excluded from this restriction)
• Income from immovable property outside a freezone, or from residential property inside a freezone
• Activities not listed in MD 229 of 2025 as qualifying activities
• Ancillary activities connected to any excluded activity

Table: qualifying vs. non-qualifying income — practical examples

The de minimis rule — the safety valve and its limits

A QFZP is allowed some non-qualifying income without losing its 0% status, provided the non-qualifying revenue stays within the de minimis threshold: the lower of 5% of total revenue or AED 5,000,000.

How the threshold works in practice:

• Total revenue AED 10,000,000 → de minimis cap = AED 500,000 (5%)
• Total revenue AED 200,000,000 → de minimis cap = AED 5,000,000 (hard cap, not 5%)

Breach example: A freezone company generates AED 14,000,000 in total revenue, of which AED 800,000 comes from a mainland UAE client. That is 5.7% of revenue — above the 5% cap. QFZP status is lost for the entire tax period. The breach does not apply from the date the threshold was crossed; it applies retroactively to the whole year.

The most common cause of an inadvertent breach is a one-off consulting project or a service contract with a mainland UAE entity — even where the income amount seems immaterial against total revenue.

Substance requirements — what "adequate" actually means

Condition 2 requires "adequate substance" in the freezone. The word "adequate" is not defined with a specific headcount or expenditure formula, but the Federal Tax Authority scrutinises several concrete indicators:

What satisfies substance requirements:

• A genuine office lease in the freezone (a virtual address or shared hot desk does not qualify)
• Qualified employees physically present in the UAE and on UAE payroll
• Board meeting minutes showing management decisions made by UAE-based directors
• Operating expenditure proportionate to the level and type of activity
• Core income-generating activities performed inside the freezone

What does not satisfy substance requirements:

• A registered address without physical office space
• A single part-time administrator with no substantive role
• Management decisions made entirely from outside the UAE
• Outsourcing all operations to mainland service providers

The FTA can request office lease agreements, employment contracts, payroll records, board communication records, and org charts to verify substance. Companies relying on the QFZP exemption should maintain this documentation actively — not as an afterthought at audit time.

Audited financial statements — mandatory from 2025

Ministerial Decision No. 84 of 2025 requires all QFZPs to prepare audited financial statements for tax periods commencing on or after January 1, 2025. There is no revenue threshold exception — every QFZP must comply, regardless of size. IFRS compliance is required.

This is a significant change. Previously, the audit obligation applied only to entities with revenue above AED 50,000,000. The expanded mandate means that a small freezone company with, say, AED 800,000 in annual revenue that relies on QFZP status must now engage a registered auditor — or risk losing QFZP status entirely.

Note: If your freezone company's tax period started on or after January 1, 2025, you are already within the scope of the mandatory audit requirement. If you have not commissioned an audit, this is a compliance gap that needs to be addressed before your return is due.

Small Business Relief — what it is and why it ends in 2026

Small Business Relief (SBR) is a separate mechanism from the QFZP exemption. It allows eligible businesses to treat their taxable income as zero — effectively paying 0% corporate tax — by making an election to the FTA. It is not automatically applied; it must be actively elected.

0% for revenue under AED 3 million (by election)

SBR is available to UAE resident taxable persons whose revenue does not exceed AED 3,000,000 in any tax period from June 1, 2023 onward. The AED 3,000,000 cap is assessed against the current tax period and all prior periods — a single year of revenue above the threshold permanently disqualifies the entity from claiming SBR in subsequent periods.

SBR is most relevant to small mainland companies and to freezone companies that do not yet meet all seven QFZP conditions. It has been a practical safety net for operators who are building toward QFZP compliance but are not there yet.

Expires December 31, 2026 — no extension announced

SBR is only available for tax periods that end on or before December 31, 2026. After that date, the standard 9% regime applies to taxable income above AED 375,000 — even for businesses with revenue well below AED 3,000,000.

As of April 2026, no extension has been announced. There is no official indication that SBR will be renewed or replaced with an equivalent measure.

Who this affects most:

• Small mainland service companies currently below the AED 3,000,000 revenue cap
• Freezone companies that have been relying on SBR as a fallback while QFZP conditions are not fully met
• Sole trade license holders who have not yet engaged with the CT registration and compliance framework

The action required before year-end: Any business currently using SBR needs to model two scenarios for 2027: either confirm that it meets all seven QFZP conditions (if a freezone company), or plan for 9% tax compliance and budget accordingly.

What happens if you lose QFZP status

The 5-year disqualification period

This is the QFZP provision that most guidance underweights. If a freezone company fails to meet any of the seven conditions in a tax period, QFZP status is lost for the current tax period and the four tax periods that follow — five years in total. All income for those five years is taxed at the standard 9% rate. Even if the breach is corrected in year two, the 9% regime continues until the five-year period runs out.

Tax cost illustration:

A freezone company with AED 5,000,000 in annual taxable income loses QFZP status due to a de minimis breach:

• AED 375,000 × 0% = AED 0
• AED 4,625,000 × 9% = AED 416,250 in annual tax
• Over five years: approximately AED 2,080,000 in avoidable tax

That is the real-world cost of a single inadvertent breach — for example, one consulting engagement with a mainland UAE client that pushed non-qualifying revenue above 5%.

This is not a compliance formality. It is a material financial risk that should be assessed annually — not just at formation.

The voluntary election alternative and its own lock-in

A QFZP can choose to voluntarily elect into the standard 9% regime under Article 19 of the CT Law. Once made, that election is irrevocable for five consecutive tax periods. It cannot be reversed within that window.

The voluntary election makes sense for a specific type of company: one with significant mainland UAE business that makes meeting QFZP conditions practically unachievable. If you are primarily serving UAE mainland clients and the de minimis threshold is regularly exceeded, voluntarily electing into the standard regime provides planning certainty and removes the administrative burden of maintaining QFZP documentation for an exemption that does not actually apply.

Which freezone activities qualify?

The current qualifying activities framework is set out in MD 229 of 2025 (effective August 28, 2025, retroactive to June 1, 2023). This decision replaced MD 265 of 2023. Any guide or analysis still referencing MD 265 as the operative framework is out of date.

Key nuances that frequently arise in practice:

Logistics and distribution: Logistics services qualify, but only where distribution and warehousing functions represent less than 51% of total revenue. This restriction was introduced in MD 229 of 2025 and was not present in the prior framework.

Banking vs. financial services: Banking and regulated insurance activities are excluded from qualifying activities. However, fund management, treasury and financing services, wealth management, and reinsurance are all qualifying. The distinction matters for fintech and financial services operators.

Immovable property: Income from immovable property is generally excluded. The exception is commercial property in a freezone transacted between freezone persons — residential property is excluded regardless of location.

IP income: Patents, copyrights, and software developed inside the freezone generate qualifying IP income. IP acquired from third parties (rather than developed internally) is not automatically qualifying — the development requirement is meaningful.

Reference point: The Federal Tax Authority's Qualifying Free Zone Persons Corporate Tax Guide (CTGFZP1, published May 2024) remains the most detailed official guidance on qualifying activities, substance requirements, and the application of the de minimis rule. It is publicly available at tax.gov.ae.

Corporate tax for mainland Dubai companies

Mainland Dubai companies — those incorporated by the Department of Economic Development rather than in a freezone — are subject to corporate tax under exactly the same rate structure: 0% on taxable income up to AED 375,000 and 9% on income above that threshold. There is no QFZP exemption available to mainland entities.

For mainland companies, the full range of qualifying vs. non-qualifying income analysis does not apply — all taxable income is treated the same. The relevant planning considerations are:

• Dividends received from UAE-incorporated subsidiaries are exempt under the participation exemption
• Capital gains on qualifying UAE shareholdings are generally exempt (subject to participation exemption conditions)
• Foreign-source income is included in the taxable income base, with a foreign tax credit available for tax paid overseas
• Small Business Relief is available until December 31, 2026 for mainland companies with revenue under AED 3,000,000

For founders choosing between a freezone structure and a mainland structure, the tax comparison is not simply "0% vs. 9%." It depends on whether the freezone structure can realistically meet QFZP conditions. Our Dubai freezone vs. mainland company comparison covers this decision in detail.

Transfer pricing rules for related-party transactions

Transfer pricing compliance is Condition 5 of the QFZP framework. Articles 34 and 35 of the Corporate Tax Law require that all transactions between related parties are conducted on arm's-length terms — the OECD standard, which the UAE has adopted in full.

The documentation requirements are triggered by thresholds set out in Ministerial Decision No. 97 of 2023:

• Aggregate related-party transactions above AED 40,000,000: Full transfer pricing documentation required (master file and local file)
• Single category of related-party transactions above AED 4,000,000: An itemized disclosure schedule must be prepared and retained for FTA inspection

QFZPs are not exempt from these requirements. Transfer pricing compliance is explicitly a condition of QFZP status. The most common risk areas are intercompany service fees, IP licensing arrangements between related freezone entities, and management charges without documented market-rate support.

A transfer pricing analysis is not optional for companies with meaningful related-party transactions. It is a compliance obligation — and the absence of documentation can trigger both loss of QFZP status and separate penalties under the CT Law.

Filing and compliance requirements

Corporate tax compliance involves several obligations beyond the tax calculation itself. The key requirements are:

CT return filing: The corporate tax return must be filed within nine months of the end of the tax period. For businesses on a calendar year (January–December 2025), the filing deadline is September 30, 2026. Tax payment is due on the same date.

Registration: All businesses within scope of UAE corporate tax must register with the FTA. Failure to register carries a one-time penalty of AED 10,000 under Cabinet Decision No. 10 of 2024.

Record retention: Records must be kept for a minimum of seven years from the end of the relevant tax period.

Audited financial statements: Required for all QFZPs (MD 84 of 2025) and for all entities with annual revenue above AED 50,000,000. IFRS required.

Transfer pricing documentation: Retained by the company and submitted on FTA request. No annual filing required, but documentation must exist and be current.

Late filing penalty: AED 500 per month in the first year of non-compliance; AED 1,000 per month thereafter.

Late payment penalty: 14% per annum on the unpaid tax amount, calculated monthly.

Note: If your business is not yet registered with the FTA, the registration process should be completed immediately. The penalty for late registration applies regardless of whether any tax is ultimately owed.

Who this is NOT for

This guide focuses on the corporate tax position of UAE-incorporated entities. It is not the right starting point if:

• You are evaluating whether to form a UAE company — start with our Dubai freezone company formation guide, which covers structure selection, freezone options, costs, and the setup process before getting into tax
• You are a large multinational enterprise with group revenue above EUR 750,000,000 — the Domestic Minimum Top-Up Tax (DMTT) at 15%, implementing the OECD Pillar Two global minimum tax, applies to you and requires specialist advice beyond the scope of this guide
• You are asking about personal income tax — the UAE currently has no individual income tax on salary, freelance income, or investment returns at the federal level
• You are asking about VAT — UAE VAT (5% standard rate) is a separate regime governed by Federal Decree-Law No. 8 of 2017 and is not addressed here

What to do now — by company type

If you are a freezone company claiming QFZP status: Audit all seven conditions against your current operations. Confirm that your substance documentation — office lease, payroll, board minutes — is current and well-organised. If your tax period commenced on or after January 1, 2025 and you have not yet commissioned an audit, you are non-compliant with MD 84 of 2025.

If you are a freezone company with mixed mainland and international revenue: Calculate your de minimis exposure for the current tax period. If mainland revenue is approaching 5% of total revenue, model the cost of a potential QFZP loss versus the cost of voluntarily electing into the standard regime.

If you are relying on Small Business Relief: SBR expires December 31, 2026. If your revenue is below AED 3,000,000 and you operate a freezone company, assess whether you can meet the QFZP conditions from January 2027. If you operate a mainland company or cannot meet QFZP conditions, budget for 9% corporate tax from that date.

If you are a mainland company: Register with the FTA if you haven't done so, calculate your expected taxable income for 2025, and file by the applicable deadline. SBR is available for revenue under AED 3,000,000 until year-end 2026 — elect it actively if eligible.

If you have related-party transactions: Assess whether your aggregate intercompany flows exceed AED 40,000,000 (full TP documentation required) or whether any single category exceeds AED 4,000,000 (disclosure schedule required). For QFZPs, TP compliance is a condition of the exemption, not merely a best practice.

Conclusion

UAE corporate tax in Dubai is real, structured, and applies to most businesses. The 9% rate on taxable income above AED 375,000 is the default. The 0% QFZP exemption for freezone companies is genuine, but it is conditional — seven specific criteria, all of which must be satisfied simultaneously, in every tax period. For founders who serve international clients through a properly structured freezone company with real substance in the UAE, the 0% exemption is achievable and defensible. For companies serving UAE mainland clients, or operating with a registered address but no real physical presence, the reality is different.

Two deadlines matter most right now. Small Business Relief expires December 31, 2026. And for freezone companies whose tax periods started after January 1, 2025, the mandatory audit requirement under MD 84 of 2025 is already in force.

If you are in the process of setting up a freezone company, our Dubai freezone company formation guide covers structure selection, freezone options, and the registration process. If you are deciding between a freezone and a mainland structure, the freezone vs. mainland comparison sets out the trade-offs in full.

UAE corporate tax is complex enough that this guide is a starting point, not a substitute for qualified advice. For businesses with material taxable income or significant related-party transactions, a UAE-registered tax agent or corporate tax advisor is worth engaging before your first return is due.

The information in this article is for research and educational purposes only. It does not constitute legal or tax advice. Program rules, investment thresholds, and government fees change frequently — always verify current requirements with a licensed advisor before taking action.