Is 0% Corporate Tax Still Possible in Dubai?

At the time when the UAE was issuing the Corporate Tax, a lot of business owners thought that the day of tax-free operations in Dubai was gone. The news articles, social media debates, and even some advisors started propagating the story that after the Corporate Tax is slated, it will be mandatory to pay 9 % tax, particularly among firms with high incomes.

To a large extent, this belief is not right.

Although Corporate Tax has been introduced, businesses continue to be allowed by law to pay 0% Corporate Tax in Dubai where business can be run without paying Corporate Tax even when its turnover is AED 100 crore, AED 500 crore or more. It is not the amount of revenue and the important thing is the manner in which the business is organized and licensed.

High Turnover Does Not Mean High Tax

One of the most common myths is that companies with a rise in income above a specific level, usually cited as AED 3 million, are obliged to pay 9 % of the Corporate Tax. Such confusion has led to the restructuring of many entrepreneurs in the wrong direction or paying tax when they did not need to do so.

The turnover in reality does not suffice to compute tax as per the UAE Corporate Tax framework. Rather, one is eligible to pay 0% tax based on:

• The company’s jurisdiction (Free Zone vs Mainland)
• The nature of its business activities
• Compliance with substance and regulatory requirements

Consequently, numerous companies are paying Corporate Tax without necessity based on old or incomplete information even at the advice of established consultants.

Legal Support for 0% Corporate Tax

The option to pay 0% Corporate Tax in Dubai is firmly backed by UAE legislation. The most important references are:

• Ministerial Decision No. 139 of 2023
• Read in conjunction with Cabinet Decision No. 55 of 2023

These legal tools define that a company that is considered a Qualifying Free Zone Person and whose income is the result of Qualifying Activities may use 0% Corporate Tax rate on the income.

There is no loophole or temporary incentive. It is an intentional policy decision that aims at ensuring that UAE remains competitive as a business hub around the world.

What Is a Qualifying Free Zone Person?

Not every Free Zone company automatically qualifies. To be treated as a Qualifying Free Zone Person, a business must satisfy several conditions, including:

• Being registered in a recognized UAE Free Zone
• Conducting activities approved as qualifying
• Maintaining real economic substance, such as physical premises and staff
• Generating income through permitted transactions
• Meeting accounting, audit, and Corporate Tax filing obligations

Because of these requirements, Free Zone company formation is a strategic decision, not merely an administrative one.

Business Activities Eligible for 0% Corporate Tax

The UAE law clearly defines categories of activities that can qualify for the 0% tax rate when conducted through a Free Zone entity.

• Industrial and Manufacturing Activities

Businesses involved in producing goods, materials, or industrial products can qualify fully. Even partial production or assembly carried out in the UAE may be sufficient to meet the criteria.

• Processing and Value Enhancement

Companies that add value to existing products without manufacturing from scratch can still qualify. This includes refining, packaging, or modifying goods before resale.

• Holding Companies

Entities that exist primarily to hold shares or securities and earn dividend or investment income are eligible, even without day-to-day operational activities.

• Maritime and Shipping Businesses

Ship ownership, ship management, and shipping operations all fall under qualifying activities. Many companies in this sector still pay 9% tax simply because they are unaware of their eligibility.

• Fund Management and Asset Management

Investment funds, portfolio managers, and wealth management firms can qualify when structured properly within a Free Zone.

• Headquarters and Management Services

Companies providing strategic, administrative, or executive services to group entities may qualify under headquarters service activities.

• Financing, Treasury, and Leasing

Intra-group financing, treasury operations, and financial leasing activities are also included within qualifying categories.

• Aircraft Leasing and Aviation Finance

Aviation-related financing and leasing is one of the key reasons large global aviation players continue to operate in Dubai at 0% Corporate Tax.

• B2B Trading and Distribution

Wholesale trading to business customers only—where goods are resold or further processed—can qualify. Retail and direct consumer sales do not fall under this category.

• Logistics and Supply Chain Services

Warehousing, freight forwarding, and logistics support services are eligible when linked to qualifying trading or industrial activities.

• Ancillary and Supporting Services

Services that directly support qualifying activities such as IT systems for logistics, aviation, or shipping companies are also treated as qualifying income.

Why Mainland Companies Do Not Qualify

Even if a Mainland company performs identical business activities, it does not receive Free Zone tax incentives. Mainland entities fall under the standard 9% Corporate Tax regime.

For businesses aiming to legally minimize Corporate Tax exposure, Free Zone incorporation is essential.

Choosing the Right Free Zone Matters

Not all Free Zones are equal in terms of flexibility and operational fit. Popular options include:

• RAKEZ (Ras Al Khaimah Economic Zone)
• IFZA
• Meydan Free Zone
• Ajman Free Zone

The choice of Free Zone can influence compliance costs, scalability, and long-term tax efficiency.

Conclusion

The ability to achieve 0% Corporate Tax in Dubai has nothing to do with how big or profitable a company is. It depends entirely on:

• Jurisdiction
• Activity classification
• Legal structure
• Ongoing compliance

When these elements align, even very large businesses can legally operate at 0% Corporate Tax. Dubai’s Free Zone framework continues to offer one of the most attractive and transparent tax environments in the world for businesses that structure themselves correctly.