The UAE introduced corporate tax in June 2023. Two years later, there is still significant confusion among African entrepreneurs particularly those in free zones about what applies to them and what does not. This...
The UAE introduced corporate tax in June 2023. Two years later, there is still significant confusion among African entrepreneurs particularly those in free zones about what applies to them and what does not. This article gives you the clear picture.
UAE corporate tax applies at 9% on taxable profits above AED 375,000. For profits below this threshold, the rate is 0%. Small businesses and startups generating less than AED 375,000 in annual profit pay nothing and are in the same position they were before corporate tax was introduced.
Free zone companies can qualify for a 0% corporate tax rate on qualifying income. But there is an important caveat: this is not automatic, and it comes with conditions.
To benefit from the 0% free zone rate, your company must: be a Qualifying Free Zone Person (QFZP), earn income from qualifying activities, maintain adequate substance in the free zone, and not earn income from mainland UAE activities or non-qualifying sources above a certain threshold.
The most common mistake is assuming that a free zone registration automatically means 0% tax with no further obligations. This is incorrect. Regardless of your profit level or qualifying status, registration with the Federal Tax Authority (FTA) is mandatory. Missing the registration deadline triggers a penalty of AED 10,000.
DBC handles corporate tax registration for AED 1,000 (included in our Accounting packages). We also advise on whether your income qualifies for the 0% rate. WhatsApp us at +971 52 277 4830.
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A company incorporated in the UAE, including in a free zone, has three months to register for Corporate Tax. Missing that deadline carries a fixed AED 10,000 penalty, with a waiver in one narrow case.
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Book a discovery call and discuss your specific UAE expansion questions with DBC.
