What is Free Zone (UAE)?
UAE Free Zones are special economic zones offering 100% foreign ownership, customs benefits, and (subject to QFZP rules) preferential 0% Corporate Tax on Qualifying Income. There are 40+ Free Zones across the seven emirates, each with their own Authority and licensing rules.
Current Rate (Annual)
0% Corporate Tax on Qualifying Income (subject to QFZP tests); 5% VAT applies
Example
A SaaS founder incorporates a FZCO in Dubai Internet City, gets 100% foreign ownership, no personal income tax, QFZP-eligible 0% Corporate Tax on customers outside UAE mainland, and access to a residence visa.
Related terms
An FZCO is a Free Zone Company with multiple shareholders (typically 2 or more, depending on the Free Zone Authority). It is a separate legal entity with limited liability, registered with a specific UAE Free Zone Authority. Common form for founder-led businesses with co-founders.
A Qualifying Free Zone Person is a Free Zone entity that meets specific tests under the UAE Corporate Tax law to retain the 0% rate on Qualifying Income. Tests include: substance (people and assets in the Free Zone), audited financial statements, transfer pricing compliance, de minimis non-qualifying revenue (≤5% or AED 5m).
UAE Corporate Tax is the federal tax on business profits introduced by Federal Decree-Law No. 47 of 2022, effective 1 June 2023. It applies a 0% rate on the first AED 375,000 of taxable income and 9% above. Qualifying Free Zone Persons can pay 0% on Qualifying Income. Multinational groups within Pillar Two scope face a 15% Domestic Minimum Top-up Tax from 1 January 2025.
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