Last Reviewed: 22 August 2025
| Business Model | Free Zone Qualifying Income | Mainland Income | Expected Tax Exposure |
|---|---|---|---|
| Pure Free Zone (QFZP compliant) | 0% | None | Low |
| Mainland Company | None | 100% | High |
| Hybrid (FZ + Mainland) | Partial | Partial | Medium |
For new and established businesses, regularly reviewing your structure, especially ahead of regulatory changes, can unlock tax savings, investment appeal, and compliance simplicity.
| Category | 0% CT on Qualifying Income? | 9% CT on Non-Qualifying? | Taint Rule |
|---|---|---|---|
| Qualifying Free Zone | Yes (if all criteria met) | Yes (on non-qualifying) | Status lost for 5 years if de minimis breached |
| Non-QFZP Free Zone | No | Yes (all income) | N/A |
A Dubai logistics FZCO nearly lost its QFZP status when a major mainland sales contract pushed non-qualifying revenue over the limit. Timely restructuring, redirecting domestic sales via a new mainland branch, helped preserve its free zone 0% rate on export activities.
However, small business relief thresholds (AED 3 million revenue cap) and the standard AED 375,000 tax-free profit threshold apply to the group as a whole; not per entity. There’s also joint liability for group debts and tax.
| Grouping Type | Ownership Threshold | Consolidated Filing | Loss Offsets | Limitations |
|---|---|---|---|---|
| Tax Group | ≥95% | Yes | Yes | Relief/thresholds apply at group level |
| Qualifying Group | ≥75% | Loss transfers | Yes | Separate returns, looser structure |
This is particularly valuable for larger, multi-entity operating groups, reducing tax on fluctuating results across business lines.
SMEs remain the backbone of the UAE’s new economy. The Small Business Relief regime permits eligible businesses (revenue ≤ AED 3 million/year) to:
| Metric | Scenario A | Scenario B | Scenario C |
|---|---|---|---|
| Revenue (AED) | 2,500,000 | 2,800,000 | 3,500,000 |
| Eligible for Relief? | Yes | Yes | No |
| Profit (AED) | 100,000 | 750,000 | 1,000,000 |
| CT Payable | 0 | 0 | 56,250 (on 625k over 375k, at 9%) |
Note: Once revenue exceeds AED 3 million in any year up to Dec 2026, full compliance resumes from that period onwards; separating businesses to stay under the cap is penalized by the FTA’s anti-abuse provisions.
All related-party and connected-person transactions (for example, intra-group services, management fees, royalties, intercompany loans, supply chain cross-charges) must be:
Common transfer pricing methods under the law:
Failing documentation or mispricing risks substantial penalties, including upward adjustment to taxable income and fines.
A family group runs logistics in a free zone and manufacturing in the mainland, trading goods between them. Each invoice must be benchmarked in line with market rates, and inter-company agreements must reflect economic reality. Annual master files/local files must justify and evidence all major cross-charges, even in loss years.
The UAE has signed over 140 DTAs covering all continents, allowing UAE-resident businesses and individuals to:
When structuring cross-border investments or group operations, always:
For example, a UAE holding company receives dividends from a treaty jurisdiction where tax is withheld. The treaty overrides local laws, so only the reduced treaty WHT applies, and the UAE owner can often claim it as a credit.
Strategic management of timing improves your after-tax profits:
Pro Tip: Document ALL expenses with contracts, invoices, and payment proofs; loose recordkeeping risks disallowance, audits, and penalties.
Many companies are turning to accounting ERP, e-invoicing, and cloud tax planning software. These reduce manual errors, support compliance, and ensure readiness for audits or FTA reviews.
0% on profits up to AED 375,000, 9% above that, 15% for certain large multinationals.
Yes, but only on qualifying income and if all QFZP criteria and substance rules are met.
SMEs with ≤ AED 3 million in revenue per year until end-2026 can elect simplified reporting and pay 0% CT, but must still register and file annual returns.
All cross-border and related-party transactions must be priced at arm’s length and documented; large entities must maintain transfer pricing files.
Breaching the de minimis limit immediately results in 9% CT on all income for that year and next four years, no QFZP relief.
Ensure legal UAE tax residency, apply for an FTA tax residency certificate, and claim foreign tax credits per relevant treaty.
Yes, registration and filing are mandatory for all entities (mainland, free zone, SME), regardless of tax due.
The UAE tax landscape offers more opportunity and pitfalls than ever. Proactive, expert-led tax planning is no longer optional: it’s a business imperative for growth, funding, and peace of mind.