The UAE has over 40 active free zones, including DIFC, ADGM, JAFZA, DMCC, and RAKEZ. Free zone companies have historically offered 100% foreign ownership, zero import/export duties within the zone, and various tax incentives. Under the UAE corporate tax regime introduced in 2023, free zone companies may qualify for a 0% corporate tax rate on qualifying income — but non-qualifying income is taxed at 9%. The key distinction that many founders miss: transacting with UAE mainland customers may disqualify income from the 0% rate unless specific conditions are met.
Watch out: Operating from a free zone does not automatically mean 0% corporate tax. You must meet the Qualifying Free Zone Person criteria, and the analysis can be complex for businesses with mixed income streams.
See also: Free Zone Person (Qualifying), Qualifying Income, Corporate Tax (CT), Mainland Company
