Free zone · corporate tax
A Qualifying Free Zone Person is allowed a little revenue that does not qualify. The allowance is the lower of 5% of total revenue or AED 5 million. Cross it and the status goes, for this tax period and the four after it.
At AED 1 million revenue the entire allowance is AED 50,000. Most owners have never run the ratio. It takes about a minute.
Anything left over is treated here as revenue from other free zone persons, which can qualify.
Manufacturing, commodity trading, fund management and the rest of the list below. Consultancy and professional services are not on it.
The list that decides it
The right hand column is where most free zone service businesses discover they have a problem. Selling advice to a mainland client is not a qualifying activity, whatever your licence says you may do.
Questions
A Qualifying Free Zone Person is allowed a small amount of revenue that does not qualify for the 0% rate. The allowance is the lower of 5% of total revenue or AED 5 million. Cross it and you are not a Qualifying Free Zone Person for that tax period.
Broadly, revenue that neither comes from another Free Zone Person nor arises from an activity on the Qualifying Activities list in Ministerial Decision 229 of 2025. For a services business selling to mainland UAE or to customers abroad, that usually means all of it, because consultancy and professional services are not on the list.
Article 18 of Federal Decree-Law 47 of 2022 removes the status from the beginning of the tax period in which the breach happened, and for the four tax periods after it. Five in total. That is the part that makes this worth ten minutes of arithmetic.
Often, below AED 3 million revenue. It gives 0% on everything, has no de minimis test, no five period cliff, and no requirement to audit. What you give up is that period's losses and net interest expenditure, which matters much less to a profitable small company than most people assume. Small Business Relief now runs to 31 December 2029.
Not the same either way. Every Qualifying Free Zone Person needs audited financial statements whatever the revenue. A company that has elected Small Business Relief instead does not, unless another rule catches it. That difference is a real annual cost and belongs in the comparison.
No, and any tool that says otherwise is lying to you. It runs the arithmetic on figures you type in. Whether a specific invoice is qualifying turns on the customer, the activity and the substance behind it. Use this to find out whether you have a problem worth looking at properly.
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Twenty minutes with your actual revenue split. If the answer is that Small Business Relief suits you better and you need less from us, we will say so.
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