With the introduction of Federal Decree-Law No. 47 of 2022 on the Taxation of Corporations and Businesses, the UAE has established a landmark corporate tax regime that mandates all entities—including free zone companies in UAE—to comply with new corporate tax registration and filing obligations. While the UAE has long enjoyed a reputation as a tax-friendly jurisdiction, the new law marks a fundamental shift by taxing business profits, albeit with unique provisions for Qualifying Free Zone Persons.

If you operate within a UAE free zone—whether as a service provider, holding company, or trading firm—understanding the corporate tax registration process, eligibility for tax benefits, and your ongoing compliance obligations is critical. In this detailed guide, Young & Right walks you through everything you need to know about corporate tax registration for free zone companies in UAE, including who needs to register, what qualifies as tax-exempt income, and how to remain eligible for the 0% rate benefit.

Introduction to UAE Corporate Tax Law

The UAE corporate tax law, introduced under Federal Decree-Law No. 47 of 2022, was implemented to align the country's tax framework with international standards, including the OECD's Base Erosion and Profit Shifting (BEPS) initiatives. Effective from 1 June 2023, the regime imposes a 9% corporate tax on taxable persons whose net income exceeds AED 375,000, while offering a 0% rate for free zone persons who meet specific regulatory and substance-based conditions.

Even businesses benefiting from the 0% rate—such as qualifying free zone companies—are not exempt from administrative responsibilities. All entities must complete corporate tax registration UAE through the EmaraTax portal, obtain a tax registration number, and file annual corporate tax returns with the Federal Tax Authority (FTA) to maintain their preferential tax status. Maintaining a valid trade license and demonstrating substantial activities within the UAE are key to retaining eligibility under the free zone regime.

Engaging a knowledgeable corporate tax consultant is highly recommended to navigate compliance requirements, ensure correct classification, and safeguard against penalties in accordance with UAE corporate tax law.

Who Must Register for Corporate Tax in UAE Free Zones?

Under the UAE Corporate Tax Law, all juridical persons established in free zones are required to complete corporate tax registration, regardless of whether they eventually become eligible for the 0% tax rate or other tax reliefs. This mandate is part of the broader efforts by the Federal Tax Authority (FTA) to ensure compliance across all legal structures, including businesses with no taxable income or net profits.

Failure to comply with registration requirements can lead to administrative penalties of up to AED 10,000, emphasizing the importance of timely and accurate submissions through the EmaraTax platform.

Entities Required to Register with the FTA:

→ Free Zone Companies and Establishments

→ Branches of Foreign Companies Operating in Free Zones

→ Holding and Investment Companies in Free Zones

→ Dual-Licensed Entities with Mainland Activities

Even if such entities are not liable to pay corporate tax, or their operations result in no taxable income, they must still submit their identification details, account information, and all required documents to complete registration.

This includes entities structured as both legal persons and, where applicable, natural persons engaged in qualifying business activities. The FTA may also require additional information for verification and obtaining the Tax Registration Number (TRN).

Overall, businesses operating in UAE free zones must adhere strictly to the corporate tax registration framework to maintain transparency and avoid non-compliance issues with the Federal Tax Authority.

Understanding Qualifying Free Zone Person Status

To be considered a Qualifying Free Zone Person (QFZP) and benefit from the 0% tax rate on eligible income, a company must meet all of the following conditions:

→ Maintain adequate economic substance in the UAE

→ Derive only qualifying income

→ Not elect to be subject to the standard 9% rate

→ Comply with transfer pricing and documentation requirements

→ Be registered and compliant with corporate tax obligations

Qualifying income includes transactions with other free zone entities and income from qualifying activities (e.g., manufacturing, warehousing, logistics, fund management, and certain IP-related services). Non-qualifying income—such as income from mainland UAE customers or non-qualifying activities—will be subject to the 9% corporate tax.

Deadlines and Timelines for Free Zone Companies

The FTA has introduced staggered deadlines based on the date of license issuance. Free zone companies must register before the specific deadline communicated to them via email or official notices. In general:

→ Companies licensed before March 2022 had earlier deadlines in May-June 2024

→ Entities licensed between March 2022–Dec 2023 are expected to register between July–December 2024

→ Newly licensed companies in 2024 and beyond must register within 3 months from license issuance

Late registration invites penalties and disqualification from QFZP benefits.

Importance of Proper Classification of Income

Accurate classification of income is mandatory for free zone businesses in the UAE seeking to retain the 0% corporate tax (UAE CT) rate under the Federal Tax Authority (FTA) regime. The distinction between qualifying and non-qualifying income directly affects a company’s eligibility status, and any oversight can trigger penalties or disqualification.

To remain compliant, free zone businesses must take a proactive approach:

→ Separate qualifying and non-qualifying transactions: For example, revenue generated from trading activities within the same or another designated free zone may qualify for the 0% tax rate, while income earned from mainland UAE customers is typically treated as taxable non-qualifying income.

→ Submit audit-ready financial statements: These statements must be up to date, accurately reflect the business's operations, and support the classification of income for FTA corporate tax assessments.

→ Maintain transfer pricing documentation: Proper reporting ensures that inter-company transactions meet arm’s length standards and are aligned with international tax rules.

→ Demonstrate economic substance compliance: The business must show real economic activity within the free zone, including adequate staffing, physical premises, and governance such as board meetings in the UAE.

→ Hold a valid trade license: It is crucial for any business operating in a free zone and looking to register for corporate tax to maintain a current and valid trade license.

In Abu Dhabi and across the UAE, understanding the classification of income is not just a compliance formality—it’s a strategic necessity for businesses aiming to foster long-term economic growth under the evolving UAE corporate tax (UAE CT) landscape. Proper classification, combined with timely submissions and financial transparency, provides a step-by-step guide toward sustaining the 0% rate eligibility and avoiding costly missteps.

How Young & Right Helps Free Zone Companies Register for Corporate Tax

At Young & Right, we play a critical role in helping Free Zone companies across the UAE—including those based in Abu Dhabi—navigate the mandatory requirements of UAE corporate tax registration. Our services are designed to ensure full compliance with the Federal Tax Authority (FTA), especially for entities aiming to retain their Qualifying Free Zone Person (QFZP) status and avoid penalties.

1. End-to-End Registration Support

We oversee the entire corporate tax registration process on EmaraTax, managing every stage—from initial document collection to final submission. We ensure the presence of an authorized signatory, the use of the correct account credentials, and full alignment with FTA deadlines.

2. QFZP Qualification Advisory

Our tax experts evaluate your income streams, operational structure, and potential permanent establishment risks to assess eligibility for the 0% tax rate under the QFZP regime. We help you sustain these benefits by providing ongoing strategic guidance.

3. Accurate Financial Reporting & Bookkeeping

Our certified accountants maintain IFRS-compliant accounts, ensuring a clear distinction between qualifying and non-qualifying income. Accurate bookkeeping supports proper tax computation and audit readiness.

4. Transfer Pricing Compliance

For Free Zone entities engaged in cross-border or related-party transactions, we prepare the necessary transfer pricing documentation, including Local Files and Master Files, to comply with OECD and FTA rules.

5. Economic Substance Reporting

We provide end-to-end assistance in meeting economic substance requirements. From maintaining sufficient staff and operational expenditure in the UAE to documenting board meetings, we ensure your Free Zone company demonstrates substantial business activity within the jurisdiction.

6. Ongoing Tax Filing & Advisory

Our corporate tax services extend to annual return filings, support during FTA audits, and assistance with penalty waiver applications. Whether your business is small or scaling under the global star rating system, we deliver full-spectrum compliance support tailored to your growth.

Conclusion

Navigating corporate tax registration for free zone companies in UAE can be complex, especially when trying to benefit from the 0% tax rate while staying compliant with FTA regulations. From understanding qualifying income and economic substance rules to preparing proper financials and managing deadlines, free zone businesses have much to consider.

That’s where Young & Right steps in. With our expertise in corporate tax services, bookkeeping, FTA submissions, and compliance strategy, we empower UAE free zone companies to register correctly, maintain their tax advantages, and avoid costly missteps.