Who pays 0% corporate tax in the UAE: the three routes explained

UAE corporate tax is 0% on taxable income up to AED 375,000 and 9% above it for companies taxed under the standard rules. Three routes keep profit at 0%. The first is that AED 375,000 band. The second is Small Business Relief: a resident business with revenue of AED 3 million or less in the tax period (and in every earlier one) can elect to be treated as having no taxable income, for tax periods ending on or before 31 December 2029 after the Ministry of Finance extended the relief in August 2026. The third is the free zone QFZP regime: 0% on qualifying income, but 9% on all other taxable income with no AED 375,000 band. None of the three applies without a filed return, and each can be lost.

UAE corporate tax rates in brief

Federal Decree-Law No. 47 of 2022 introduced corporate tax for tax periods starting on or after 1 June 2023. Under Article 3(1) the rate is 0% on taxable income up to AED 375,000 (the amount set by Cabinet Decision 116/2023) and 9% on taxable income above it. Taxable income is accounting profit adjusted for the tax rules, so the tax is charged on profit and not on revenue.

Two regimes sit next to the standard rules. Small Business Relief removes taxable income entirely for businesses under a revenue threshold. The QFZP regime in Article 3(2) replaces the standard rates for qualifying free zone companies with a separate pair of rates. The sections below cover each route and how companies fall out of it.

Route one: the AED 375,000 band under the standard rules

Every company taxed under Article 3(1) pays 0% on the first AED 375,000 of taxable income in each tax period. That includes mainland companies and free zone companies that are not QFZPs or have elected to be taxed under the standard rules (Article 19). It is part of the rate table, so no election is needed.

The band does not apply to a Qualifying Free Zone Person. Article 3(2) taxes a QFZP at 0% on qualifying income and 9% on all other taxable income, with no 0% slice on top. A free zone company with non-qualifying income should compare both outcomes before assuming the band helps.

The band applies to profit, so the company has to be able to show its profit. Without monthly bookkeeping there is nothing to support the figure in the return if the Federal Tax Authority asks.

Route two: Small Business Relief to 31 December 2029

A resident person whose revenue is AED 3,000,000 or less can elect Small Business Relief (Ministerial Decision No. 73 of 2023) and be treated as having no taxable income for the period. The return is still filed and the tax due is zero.

On 7 August 2026 the Ministry of Finance announced Ministerial Decision No. 131 of 2026, which extends the relief to tax periods ending on or before 31 December 2029. Under the original decision it would have ended with periods ending on 31 December 2026.

The revenue test runs per tax period. Revenue must be AED 3 million or less in the period you claim for and in every earlier tax period since the regime began. One period above AED 3 million rules the relief out for that period and every later one. It is not a rolling 12-month test (that belongs to VAT registration), and it looks at revenue, so a low-margin business can exceed it while earning little.

Two groups cannot use the relief whatever their revenue: Qualifying Free Zone Persons and members of multinational enterprise groups. Our Small Business Relief guide covers eligibility and the election in detail.

Route three: the QFZP regime for free zone companies

A Qualifying Free Zone Person pays 0% on qualifying income and 9% on all other taxable income (Article 3(2)). The regime has no end date, but its conditions are cumulative and are tested every tax period.

If any condition fails, the company stops being a QFZP from the start of that tax period and for the next four tax periods (MD 229/2025, Art. 5). During those five periods the standard rules apply, including the AED 375,000 band.

The usual failure is mainland or excluded revenue creeping past the de minimis limit because nobody reconciles it monthly. Our corporate tax calculator gives a first estimate; the monthly reconciliation is what keeps the status.

Small Business Relief or QFZP: choosing as a free zone company

A free zone company under AED 3 million of revenue has a real choice, but not one it can remake every year. A QFZP cannot elect Small Business Relief. To use the relief, a free zone company that meets the QFZP conditions has to elect out of the regime (Article 19), and that election covers the tax period and the next four. Model both before you file.

The extension to 2029 gives smaller companies more room. A company that expects to stay under AED 3 million can use the relief for several more years. One that expects to pass AED 3 million soon should build the substance and audit trail now, because the QFZP conditions take time to put in place and cannot be backfilled at the end of a period.

Registration, filing and penalties

All three routes are claimed in a filed return. Corporate tax registration is mandatory even for a company that expects to pay nothing, and the return and any payment are due within nine months of the end of the tax period (Articles 53 and 48). A year ending 31 December 2025 is due by 30 September 2026.

Late registration costs AED 10,000, waived automatically if the first return is filed within seven months of the end of the first tax period. A late return costs AED 500 a month for the first 12 months and AED 1,000 a month after that. The full calendar is in our guide to corporate tax deadlines and penalties.

To pick a zone whose activity list and substance requirements fit how you actually operate, compare them in the Free Zone Index. For registration, the return and the SBR or QFZP analysis, see our corporate tax service.

This is general information on UAE rules. It is not legal, tax or immigration advice for your situation. Rules and government fees change; we confirm the position for your facts in writing before you act.