Small Business Relief and free zones
I have a free zone company. Do I pay 0% or use Small Business Relief?
Often questioned by the tax authority: take care
The basic rule
A Qualifying Free Zone Person pays 0% on qualifying income and 9% on its other taxable profit. It must have real activity and staff in the zone (official term: adequate substance), earn qualifying income, deal at market prices with related parties and document it (official terms: arm’s length, transfer pricing), and meet other conditions. Missing one condition ends the status from the start of that tax year.
When it is different
- Many service-based solo free zone companies serving mainland or individual clients have income that is not qualifying income.
- A free zone company that is not a Qualifying Free Zone Person (including one that elects under Article 19 to be taxed at the normal rates) is taxed like a mainland company and may elect Small Business Relief if eligible.
- Losing Qualifying Free Zone Person status takes effect from the start of the period in which a condition is failed, and the implementing decisions can extend the effect to later periods.
Documents to keep
- Free zone licence
- Analysis of income types and customers
- Substance evidence (premises, staff, decisions in the UAE)
How safe is it?
Often questioned by the tax authority: take care High: the choice depends on facts that a general answer cannot check.
When to ask a professional
Have it confirmed by an FTA-registered tax agent before your first return. Who can confirm it for your own case: an FTA-registered tax agent (a tax professional approved by the UAE tax authority), or the optional year-end review in SoloBooks.
Check it with the free calculator: Small Business Relief calculator →
Sources
- Federal Decree-Law No. 47 of 2022 on the Taxation of Corporations and Businesses (consolidated, unofficial English translation) — Art. 3(2), 18(1)–(3) and 19
- Ministerial Decision No. 73 of 2023 on Small Business Relief — Art. 3(2)
General information, not tax advice. Your situation may differ.
Keep your records ready all year
SoloBooks reads your receipts, you approve each one, and you get your year-end figures to file your return yourself.
No card required. Cancel by doing nothing.
Related questions
- I am a freelancer with a personal licence. Am I subject to Corporate Tax?
- Am I eligible for Small Business Relief (no Corporate Tax for small businesses)?
- What are the traps with Small Business Relief?
- What rate does my company pay if it does not use Small Business Relief?
- Can I keep my records on a cash basis (when money comes in or goes out) instead of accruals?