🔄

Understanding Qualifying Income in 2025 for Corporate Tax in UAE Free Zones.

No items found.

Since the UAE's federal corporate tax went into effect, a lot of business owners have been asking the same thing: what does this mean for companies in free zones?

The UAE government has said that free zones will still get special tax breaks, but only if certain conditions are met. In other words, not all income is taxed the same way. Now, every business that works in a UAE free zone needs to know the difference between qualifying and non-qualifying income.

Why This Is Important for Business Owners

When the UAE put a 9% corporate tax on profits over AED 375,000, free zone companies wanted to know if they would still be able to avoid paying taxes.

The answer: yes, but only under certain conditions.

This means that entrepreneurs who want to protect their profits and stay competitive need to plan and follow the rules for taxes more than ever.

What Is Considered Qualifying Income?

The UAE Ministry of Finance has listed the types of income that companies in free zones can count as qualifying. Some important areas are:

What Doesn't Count

Not all types of income can get the 0% rate. Some types of income that don't qualify are:

The normal 9% corporate tax applies to this kind of income.

Following the Rules and Reporting

Even with the lower rates, compliance is still very strict. Companies in free zones must:

If you don't follow the rules, you could lose all of your free zone tax benefits and face fines.

Finding a Middle Ground

For international entrepreneurs, free zones are still one of the best options. They give:

But the scales have changed. Just "set up in a free zone and enjoy 0% tax" is no longer enough. To be eligible, companies must now make sure that their operations, reporting, and strategy all work together.

Final Thoughts

The UAE has kept its promise to be a business-friendly place, even after the corporate tax was added. Free zones still have clear tax benefits, but only for businesses that meet the requirements for qualifying income.

Business owners in 2025 should not see paying taxes as a problem, but as a necessary part of building a business that will last. Businesses can get the most out of their free zone benefits and still follow all UAE laws if they set up their business correctly from the start.

Contact us today to ensure your UAE free zone company stays compliant and tax efficient.

We are serious about your business.

Strategic brilliance! This consultancy understands our needs and delivers with precision. Grateful for the positive impact on our business.

- Alexander Bennett, Microsoft
More Insights
WhatsApp
Chat with us ×
Vyssor Logo
Hello. How can we assist you today?
Tap the Vyssor logo to connect with us.