How corporate tax applies to UAE free zone businesses

The UAE applies a headline corporate tax rate of 9 per cent on taxable profits above the statutory threshold. Free zone businesses sit inside that regime rather than outside it — the relevant question is whether a particular stream of income meets the conditions for the preferential rate, not whether the company happens to hold a free zone licence.

In broad terms, income earned from qualifying activities and from transactions with other free zone entities is treated differently from income earned through business conducted with the mainland market. A company that does both will find its profit split for tax purposes rather than treated as a single pool.

That makes bookkeeping a substantive tax matter rather than an administrative one. Businesses that cannot cleanly attribute revenue to one category or another are the ones most likely to face difficulty at filing.

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