UAE Free Zone Firms Must Meet 'De Minimis' Rule to Keep 0% Tax Rate

UAE, 7 May, 2025 : Free zone companies in the UAE can still enjoy a 0% corporate tax rate under the new tax regime, but only if they meet key conditions—most notably the “de minimis” requirement.

Introduced under the UAE Corporate Tax Law in 2023, the 9% corporate tax rate generally applies to businesses, but qualifying free zone persons (QFZPs) may retain the 0% rate if their non-qualifying income remains within strict limits.

To meet the de minimis test, non-qualifying income must not exceed 5% of total revenue or AED 5 million—whichever is lower. Crossing this threshold results in full taxation at 9%.

Non-qualifying income includes revenue from excluded activities, dealings with non-free zone entities, and certain intra-free zone transactions. However, revenue from operations outside the free zone or involving intellectual property is taxed at 9% regardless and excluded from the de minimis calculation.

Experts advise regular tax reviews and strict monitoring of revenue sources to ensure compliance and preserve QFZP status under Article 18 of the law.