Introduction

Not every business in the UAE is required to pay the standard 9% Corporate Tax. The UAE’s Corporate Tax Law, effective from June 1, 2023, includes specific exemptions and reliefs—especially for certain Free Zone companies and government-related entities.

If you’re wondering whether your business qualifies for tax exemptions or 0% Free Zone relief, this blog explains it all based on FTA regulations, Cabinet Decisions, and Ministerial Guidelines — updated for 2024.

Who is Exempt from UAE Corporate Tax?

According to Federal Decree-Law No. 47 of 2022, the following entities are exempt from Corporate Tax, either automatically or upon approval:

 1. Government Entities

• Federal and Emirate-level authorities
• Public institutions directly controlled by the government
  (Exemption is automatic)

 2. Government-Controlled Entities

• Must be listed in a Cabinet Decision
  (Not automatic — subject to approval)

3. Extractive and Non-Extractive Natural Resource Businesses

• Must operate under a government concession agreement
• Income should be from oil, gas, or other resource-based activities
  (Exemption requires notification, not registration)

4. Qualifying Public Benefit Entities

• Charities, endowments, social foundations
• Must be approved and listed by Cabinet
  (Exemption is conditional and must be applied for)

5. Pension and Social Security Funds

• UAE-regulated private or public pension funds
• Must meet FTA conditions and apply for exemption

6. Qualifying Investment Funds

• Includes mutual funds, real estate investment trusts (REITs), venture capital funds
• Must meet conditions under Ministerial Decision No. 81 of 2023

7. Wholly Owned UAE Subsidiaries of Exempt Entities

• If owned 100% by an exempt entity
• Must be carrying out activities related to the exempt entity only

Free Zone Relief: 0% Corporate Tax for QFZPs

If you’re based in a UAE Free Zone, you may be eligible for 0% Corporate Tax on your Qualifying Income, provided you meet the strict criteria to be classified as a Qualifying Free Zone Person (QFZP).

Who is a Qualifying Free Zone Person?

To qualify, a Free Zone company must:

1. Maintain adequate substance in the UAE (i.e., have real office, staff, and operations)
2. Earn qualifying income (defined below)
3. Not have elected to be taxed at 9%
4. Comply with transfer pricing rules and documentation
5. Prepare audited financial statements

Failing any of these disqualifies you from the 0% rate — and you pay 9% on all taxable income.

What is “Qualifying Income”?

As per Ministerial Decision No. 265 of 2023, qualifying income includes:

• Income from trading with other Free Zone entities
• Income from overseas customers (outside the UAE)
• Certain regulated activities like logistics, warehousing, re-export, fund management, etc.
• Income from UAE mainland customers only if limited to qualifying passive income, such as:
  • Interest
  • Royalties
  • Dividends

  • Capital gains

Non-qualifying income (e.g., active sales to mainland UAE) will make you subject to 9% tax on all income — unless maintained under separate books.

Example: Free Zone Company Income Segmentation

Type of Income	Qualifies for 0% Tax?
Export to client in Germany	✅ Yes
Service to mainland client (Dubai)	❌ No (taxable at 9%)
Dividend from overseas investment	✅ Yes
Rent income from property in UAE	❌ No

How to Apply for Exemption or Free Zone Relief

1. Register for Corporate Tax via the FTA portal — even if exempt
2. Submit necessary supporting documents (MOA, license, audited accounts)
3. If applying for QFZP or public benefit status, seek FTA/Cabinet approval
4. Maintain eligibility each year by:
   1. Filing tax returns
   1. Preparing audited financials

   1. Meeting substance requirements

What If You Lose Exempt Status?

• QFZPs will be subject to 9% tax on total income in any year they fail eligibility
• Government or investment fund exemptions can be revoked if conditions are breached
• Late registration or misreporting can result in penalties

Summary Table: Exemptions vs Free Zone Relief

Entity Type	Corporate Tax Status		Conditions
Government Entities	Fully exempt		Automatic
Public Benefit Organizations	Exempt (upon approval)		Cabinet listing required
Investment Funds	Exempt (conditional)		Meet regulatory and legal criteria
Free Zone QFZPs	0% on qualifying income		Substance + qualifying income + compliance
Free Zone entities (non-QFZPs)	9% standard rate		Not eligible for relief

Final Thoughts

Corporate Tax in the UAE offers clear relief mechanisms, but they come with strict compliance obligations. Whether you’re running a Free Zone company or managing a government-backed entity, understanding your eligibility for exemption or 0% relief is critical.

Need Help With Exemption or QFZP Applications?

At Think Biz Management Consultancies, we help you:

• Evaluate your exemption eligibility
• Prepare QFZP documentation and filings
• Ensure ongoing compliance with UAE tax laws

Contact us now for a consultation on maximizing your Corporate Tax benefits.

Contact us today for a free consultation.

Contact number: ‪+971 50 983 0334‬

Email ID: info@alphabets.ae