UAE Free Zone 0% Tax 2026: Qualifying Income & QFZP Rules

Q: Is free zone income automatically 0%?

No. A free zone company only gets the 0% corporate tax rate if it is a Qualifying Free Zone Person (QFZP) and the income is qualifying income. If you fail any QFZP condition, or breach the de minimis limits, the entire entity is taxed at 9% for that year.

Q: What is the de minimis rule?

A QFZP can earn a small amount of non-qualifying income and keep its 0% rate, as long as that non-qualifying revenue stays under the lower of 5% of total revenue or AED 5 million. Crossing either limit loses QFZP status for the whole tax period.

Q: What counts as qualifying income?

Broadly, income from transactions with other free zone persons where they are the beneficial recipient, and income from qualifying activities with any customer. Income from excluded activities, from a permanent establishment, or from most immovable property is not qualifying and is taxed at 9%.

Q: What happens if I lose QFZP status?

You lose the 0% rate and the entire entity is taxed at 9% for that tax period, and the disqualification can extend to following years. That is why the QFZP conditions and de minimis limit need continuous monitoring, not a once-a-year check.

UAE free zone 0% corporate tax qualifying income 2026

07 July, 2026
Corporate Tax

Your free zone licence is not a 0% tax guarantee

Many Dubai founders assume a free zone company automatically pays 0% corporate tax. It does not. The 0% rate only applies to a Qualifying Free Zone Person (QFZP) on its qualifying income. Miss one QFZP condition, or let your non-qualifying income breach the de minimis limit, and the entire company is taxed at 9% for that year — not just the offending slice. This guide sets out exactly what keeps your 0% rate intact in 2026.

The 2026 amendments did not create a blanket free zone exemption. Free zone entities face the same documentation, transfer pricing and audit standards as everyone else — the 0% rate is a reward for meeting strict conditions, not a birthright of the licence.

The QFZP Conditions — All of Them Must Hold

Adequate substance: real people, premises and operating costs in the free zone.
Qualifying income: derived within the qualifying-activity and beneficial-recipient rules.
De minimis limits respected: non-qualifying income kept under the threshold.
No election to be taxed at 9%: you have not opted into the standard regime.
Audited accounts & transfer pricing: audited financial statements and TP compliance.

Fail any single condition and you are not a QFZP for that tax period. The consequence is severe: the whole entity is taxed at 9%, and the disqualification can extend to later years.

The De Minimis Rule at a Glance

Test	Limit
Non-qualifying revenue as % of total revenue	Under 5%
Non-qualifying revenue absolute cap	Under AED 5M
Which applies	The lower of the two
If you breach either	9% on all income

Qualifying vs Excluded Income

Qualifying income broadly includes income from other free zone persons (as beneficial recipient) and income from qualifying activities such as manufacturing, qualifying-commodity trading, holding of shares, and fund or treasury services. Excluded income — most banking and insurance, income from immovable property (with limited commercial-property exceptions), and transactions with natural persons — is taxed at 9% no matter how strong your substance is.

How to Protect Your 0% Rate in 2026

Classify every revenue stream as qualifying, excluded or non-qualifying.
Track non-qualifying revenue live against the 5% / AED 5M limit — not at year-end.
Evidence your substance with staff, premises and expenditure in the zone.
Keep audited accounts and TP files current, since both are QFZP conditions.
Model borderline mainland work before you accept it, so one deal does not sink the rate.

Keep Your Free Zone 0% Rate

Exiloz tests your QFZP conditions, classifies your income and monitors your de minimis headroom. See our corporate tax service or talk to a consultant today.

Check My QFZP Status Call Us WhatsApp

Frequently Asked Questions

Is free zone income automatically 0%?

No. You must be a Qualifying Free Zone Person and the income must be qualifying income. Fail a condition or breach the de minimis limit and the whole entity is taxed at 9%.

What is the de minimis rule?

Non-qualifying revenue must stay under the lower of 5% of total revenue or AED 5 million. Cross either and you lose QFZP status for the period.

What counts as qualifying income?

Income from other free zone persons (as beneficial recipient) and from qualifying activities. Excluded activities, PE income and most property income do not qualify.

What happens if I lose QFZP status?

The entire entity is taxed at 9% for that period, and the disqualification can extend to following years.

Explore the Free Zone Qualifying Income Cluster

Each page below goes deeper on one part of this topic.

Step 01 · ActivitiesQualifying vs Excluded ActivitiesThe activity lists that decide your rate.Explore →Step 02 · SubstanceAdequate SubstanceProving the activity really happens here.Explore →Step 03 · DisqualificationLosing QFZP StatusWhat breaks the 0% rate — and for how long.Explore →Step 04 · Register & FileRegistration & FilingFree zone companies still register and file.Explore →

Tags: Free Zone Corporate Tax UAE Tax