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Under Federal Decree-Law 47 of 2022, every taxable person in the UAE pays 0% corporate tax on the first AED 375,000 of taxable income and 9% on everything above. The rule applies to mainland and free zone businesses alike, and the Federal Tax Authority (FTA) administers registration, payment, and filing through the EmaraTax portal. Everything else in this article — the QFZP carve-out, the qualifying activities list, the de minimis threshold, Small Business Relief — is a modifier on top of that base structure.
When the corporate tax regime came in, the UAE preserved the historical free zone incentive by creating a category called the Qualifying Free Zone Person (QFZP). A QFZP pays 0% — but only on income classified as "Qualifying Income". Anything else the same entity earns is taxed at the standard 9%, with no AED 375,000 threshold relief once QFZP status is in play. The mechanics sit across two pieces of secondary legislation: Cabinet Decision 100 of 2023 defines what counts as qualifying income, and Ministerial Decision 84 of 2025 sets the requirement to prepare audited financial statements for any QFZP. The qualifying and excluded activities lists were refreshed in August 2025 by Ministerial Decision 229 of 2025, which expanded the qualifying side (chemicals, by-products, carbon credits, renewable energy certificates) and broadened the treasury/financing carve-out — a change most pre-2026 explainer guides have not caught up with. So the structural difference between mainland and designated-zone licences is real, but it is conditional, not automatic.
Don’t want to figure this out alone? Sarmat is a KHDA-certified training provider and registered typing centre in Deira, Dubai. Message us on WhatsApp — we answer questions like this every day.
To be treated as a QFZP for a tax period, the entity must meet all five of the conditions set out in Article 18 of Federal Decree-Law 47 of 2022 and the FTA Free Zone Persons Corporate Tax Guide (CTGFZP1, May 2024):
A sixth requirement runs alongside the five: the de minimis test on non-qualifying revenue (covered below). Failing any single condition strips QFZP status for the current tax period and the next four tax periods. That five-year cliff is the single most expensive thing competitors gloss over in their explainers.
The qualifying activities list under Cabinet Decision 100 of 2023, as amended by Ministerial Decision 229 of 2025, includes:
If you do these things from within a designated free zone, with substance, the income they generate sits at 0%.
The excluded activities list strips income out of the qualifying bucket regardless of where it was earned:
Worth flagging explicitly because it catches founders out: retail-packaged consumer goods are not on the qualifying-commodity list. Ministerial Decision 229 of 2025 added chemicals and environmental commodities, but a free-zone trader selling branded retail SKUs to UAE consumers is generating excluded income, not qualifying income.
Even a strong QFZP is allowed a small amount of non-qualifying revenue without losing its status. The de minimis threshold is the lower of:
| Test | Threshold |
|---|---|
| Percentage of total revenue | 5% |
| Absolute cap | AED 5,000,000 |
If non-qualifying revenue exceeds either limit, QFZP status is lost. Worked example: a DMCC-licensed FZCO bills AED 4,000,000 in total revenue across the year. Of that, AED 250,000 comes from a UAE mainland consulting engagement (non-qualifying). The math:
The single mainland engagement, worth a fraction of overall revenue, costs the entity its 0% rate on the other AED 3,750,000 for five years. That is the de minimis cliff edge.
The three examples below use round AED numbers and assume Small Business Relief is not elected. The Accountant Startup module in the 100-Step Business Accelerator walks new founders through this calculation step by step; the version below is the short read.
There is no QFZP question on a mainland LLC. The 0% threshold of AED 375,000 applies, and 9% applies to the remainder. Mainland is the simplest case to model and the easiest to plan cash flow for.
This is the case CFOs need to model most carefully. The de minimis percentage is a cliff, not a slope. Sitting at the 5% line should trigger an internal control to refuse marginal mainland work for the rest of the tax period.
Alternative scenario: the same trader adds AED 600,000 of UAE retail sales late in the year. Total revenue rises to AED 4,600,000, and non-qualifying revenue of AED 600,000 is now 13.0% of total — well over the 5% cap. The AED 5,000,000 absolute cap does not save the entity because the percentage test bites first. QFZP status is lost for the current tax period and the next four, and the entire taxable income is now taxed at the standard rate: (1,000,000 − 375,000) × 9% = AED 56,250, plus the same exposure on the next four years' profits. The cost of that AED 600,000 of mainland retail revenue is significantly higher than the gross margin it produced.
Every taxable person — including QFZPs sitting at 0% — must register on the FTA's EmaraTax portal. Late registration carries an AED 10,000 penalty under Cabinet Decision 75 of 2023, and the FTA's late-registration penalty waiver initiative is best treated as a one-time amnesty rather than a planning tool. Filing mechanics, the nine-month deadline from financial-year end, financial-year selection, and late-filing penalties are out of scope for this article — see the full deadlines and financial-year selection guide for the operational detail. The cash impact of the first filing window is a planning exercise in its own right; the cash flow forecasting guide covers how to set the reserve aside before the FTA invoice lands.
Multinational groups with consolidated global revenue above EUR 750 million have faced a 15% Domestic Minimum Top-Up Tax since 1 January 2025 under Cabinet Decision 142 of 2024, aligning the UAE with the OECD Pillar Two framework — if that is your group's scale, speak to a Big Four advisor; this article addresses the UAE SME default.
Small Business Relief is available to UAE resident persons with revenue below AED 3,000,000 in the relevant tax period, for tax periods ending on or before 31 December 2026. The relief is elective and treats taxable income as zero for the period — but the entity still has to register, still has to file, and still has to keep records. It is genuinely useful for a first-year SME finding its feet, but it is transitional. The current sunset date is end-of-2026, so any planning beyond next year should assume the relief is not available and the standard 9% rule above AED 375,000 returns.
Most penalty exposure Sarmat sees is not founders ignoring the rules — it is founders learning the rules late. The 100-Step Business Accelerator's Setup track covers UAE company formation end-to-end, and the Accountant Startup module specifically prepares first-time founders for the mechanics of CT registration, the QFZP election decision, transfer pricing documentation, and the cash-flow side of the first filing. The course will not turn you into a tax advisor — it will give you enough fluency to brief your accountant accurately, avoid the AED 10,000 late-registration penalty, and stay on the right side of the de minimis cliff for the long run. Talk to the team on WhatsApp if you want a 15-minute call to map your entity to the right compliance track, or browse the 100-Step Business Accelerator programme.
0% on taxable income up to AED 375,000 and 9% above, under Federal Decree-Law 47 of 2022. Free zone businesses can sit at 0% on qualifying income only if they meet the five Qualifying Free Zone Person conditions and the de minimis test. Multinational groups above EUR 750 million in global revenue face a separate 15% Domestic Minimum Top-Up Tax effective from 1 January 2025 under the OECD Pillar Two framework.
Yes — the licence does not exempt the business automatically. A free zone company pays 0% on Qualifying Income only if it qualifies as a QFZP, which means meeting all five conditions in Article 18 of Federal Decree-Law 47 of 2022 (substance, qualifying income, no opt-in election, transfer pricing compliance, audited financial statements) plus the de minimis threshold on non-qualifying revenue. Any income outside that envelope is taxed at the standard 9%.
Qualifying income is defined in Cabinet Decision 100 of 2023, as amended by Ministerial Decision 229 of 2025. It covers transactions with other free zone persons (where the recipient is the beneficial recipient) and a defined list of qualifying activities including manufacturing, processing, distribution from a Designated Zone, holding of shares, qualifying IP, fund management, headquarter services, and from August 2025 the trading of qualifying commodities including chemicals and environmental commodities.
The de minimis rule allows a QFZP to earn a small amount of non-qualifying revenue without losing its status. The threshold is the lower of 5% of total revenue or AED 5,000,000. Exceeding either limit strips QFZP status for the current tax period and the next four tax periods, with all taxable income reverting to the standard 9% rate above AED 375,000.
Yes, for tax periods ending on or before 31 December 2026, where revenue in the relevant period and prior periods is below AED 3,000,000. The relief is elective. The entity still registers and files, but taxable income is treated as zero. Any planning horizon that extends past end-2026 should not rely on the relief continuing.
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