UAE Free Zone Tax Benefits...

The UAE's reputation as a tax-friendly business hub is a major draw for global entrepreneurs, and UAE free zones are at the heart of this advantage. While the recent introduction of Corporate Tax has changed the landscape, free zones continue to offer significant tax incentives. This guide explains the key tax benefits you can expect in 2025 and beyond.

Understanding these benefits is crucial for structuring your business for maximum profitability and ensuring full compliance with federal tax laws.

Corporate Tax for Free Zone Companies

The UAE now has a federal Corporate Tax. However, the law provides a major incentive for free zone businesses. A "Qualifying Free Zone Person" can benefit from a 0% Corporate Tax rate on their "Qualifying Income."

What is a Qualifying Free Zone Person?

To qualify, your free zone company must maintain adequate substance in the UAE (i.e., have real operations here), derive "Qualifying Income," and comply with all transfer pricing rules. Our consultants can advise if your business model meets these specific requirements.

What is Qualifying Income?

In simple terms, Qualifying Income generally includes revenue generated from transactions with businesses located outside the UAE or with other companies located in any UAE free zone. Income derived from most transactions with UAE mainland companies is generally subject to the standard 9% Corporate Tax rate, with some exceptions.

Value Added Tax (VAT) in Free Zones

VAT at 5% applies in the UAE, but free zones have a special status. For VAT purposes, some free zones are considered "Designated Zones."

• Goods Transferred Between Designated Zones: The transfer of goods between two Designated Zones (e.g., from JAFZA to Dubai Airport Free Zone) is generally not subject to VAT. This is a major advantage for logistics and trading businesses.
• Services: The supply of most services is subject to the standard 5% VAT rate, regardless of whether you are in a free zone or on the mainland.
• Registration: VAT registration is mandatory for any company whose taxable supplies exceed AED 375,000 annually.

Other Key Tax & Financial Benefits

Beyond Corporate Tax and VAT, free zones offer several other crucial financial advantages:

1. 0% Personal Income Tax

   The UAE does not levy any personal income tax. As a holder of a residence visa through your free zone company, you can draw a salary or profits completely tax-free.

2. 0% Customs Duties

   Goods imported into a free zone for the purpose of re-export are exempt from the 5% customs duty. This makes free zones like Hamriyah or JAFZA ideal hubs for international import/export businesses.

3. 100% Repatriation of Profits

   Free zone companies can repatriate 100% of their capital and profits back to their home country without any restrictions or currency controls, a benefit facilitated by a strong corporate bank account.

Navigating the new tax landscape is crucial for any business. Our experts can provide tailored advice to ensure your company is structured to legally maximize these powerful tax benefits. Contact us for a free consultation.