Three legal doors keep UAE profit at 0% after the 9% era began: the AED 375,000 threshold, Small Business Relief, and the free zone QFZP regime. Each has an exact shape — and a standard way people fall out of it.
The UAE headline rate is 9% on taxable profit above AED 375,000, but three legal routes still hold profit at 0%: the AED 375,000 threshold every company gets, Small Business Relief for revenue up to AED 3M (through periods ending 31 December 2026), and the free zone QFZP regime for qualifying income with no expiry. None of them is automatic — each is a set of conditions you keep, in the books, or lose. In our practice registering and running UAE companies, the 0% is nearly always kept or lost at the bookkeeping level, not the legal one.
Federal Decree-Law No. 47 of 2022 introduced UAE corporate tax for financial years starting on or after 1 June 2023. The structure is deliberately simple: 0% on taxable profit up to AED 375,000, and 9% on profit above it. There is no personal income tax, and the 9% applies to net accounting profit adjusted for a short list of tax rules — not to revenue. That single distinction, profit versus revenue, is where most of the 0% routes are won or lost.
On top of the standard regime sit two ways to stay at 0% above the threshold: a temporary relief for small businesses, and a permanent regime for qualifying free zone companies. The rest of this guide is those two doors and their exact conditions. Everything else in the law — grouping, loss relief, exemptions for certain funds and government bodies — sits around this spine, but for an ordinary trading company the three doors below are the whole story.
Every taxable person — mainland or free zone — pays 0% on the first AED 375,000 of taxable profit each period. For a services SME with modest margins, this alone keeps the early years untaxed. It is not an election and not a relief; it is the base of the rate table, applied automatically to every return.
The catch is arithmetic, not law. The threshold applies to profit, and profit is what your books say it is. A company without proper books cannot show its profit sits under AED 375,000, so it cannot defend the 0% band if the Federal Tax Authority asks. The threshold is free; the bookkeeping that proves it is the actual cost. This is why we treat monthly bookkeeping as the first tax decision a company makes, not an afterthought filed once a year.
Resident businesses with revenue at or below AED 3,000,000 in the current and every prior period can elect Small Business Relief (Ministerial Decision No. 73 of 2023) and be treated as having no taxable income at all — the return is filed, the tax is zero. It is a genuine gift, but with a printed expiry date: the relief runs only for financial periods ending on or before 31 December 2026.
The standard failure is a single big invoice pushing trailing revenue past AED 3M mid-period — at which point the relief evaporates for the whole period, not just the excess. Watch the running twelve-month revenue, not the calendar. And note the ceiling is revenue, not profit: a low-margin business can breach AED 3M while earning very little, and still lose the relief.
A Qualifying Free Zone Person (QFZP) pays 0% on qualifying income with no expiry date. Unlike Small Business Relief, this is a permanent regime — but the conditions are cumulative, and breaking any one of them drops you to the standard 9% from that period and for the following four years.
The conditions, in plain terms:
| Condition | What it means in practice |
|---|---|
| Adequate substance | Real people, premises and expenditure in the free zone — the core income-generating activity happens there, not on paper. |
| Qualifying income | Income from qualifying activities or from other free zone persons; mainland and excluded-activity income must stay within the de-minimis limit. |
| De-minimis | Non-qualifying revenue below the lower of AED 5M or 5% of total revenue. Cross it and QFZP status is lost. |
| Audited accounts | Audited financial statements are mandatory — not optional, regardless of size. |
| Transfer pricing | Arm's-length pricing and documentation for related-party and connected-person transactions. |
The common leak is mainland revenue drifting past de-minimis while nobody reconciles monthly. That is a bookkeeping failure first and a tax bill second — model your mix in our corporate tax calculator, then keep the books that defend it.
A free zone company that qualifies for QFZP cannot also claim Small Business Relief for the same period — the two are mutually exclusive by design. For a young free zone company under AED 3M revenue, that is a real choice: SBR is simpler and needs no de-minimis tracking, but it expires end of 2026 and blocks carried-forward losses; QFZP is permanent but demands substance, audits and transfer-pricing discipline every year.
The right answer depends on your revenue trajectory. A company that will comfortably clear AED 3M within a year or two should build QFZP discipline now rather than lean on a relief that is about to close. One that will stay small can take the simpler SBR route through 2026 and revisit — provided it also budgets for the audit and substance a later QFZP claim will need.
Whichever door you use, the 0% is defended in the accounts, not the incorporation certificate. Register in a zone whose activity and substance fit your real operations (compare all 45 in the Free Zone Index), keep audited books from day one, and reconcile your qualifying-versus-non-qualifying revenue monthly. Do that and the 0% is durable; skip it and the first FTA query turns a theoretical 0% into an assessed 9% plus penalties.
One more piece often forgotten: registration for corporate tax is mandatory even for a company that expects to pay nothing. The 0% is a rate, not an exemption from the system — you still register, still file, and still keep the records that make the zero defensible.
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