If you sell services, the free zone 0% probably is not yours

If you sell services — consulting, marketing, software, design, recruitment, agency work — there is a serious chance that the 0% you were quoted is not available to you, and that nobody has told you why. This is not a technicality buried in a tribunal decision. It is on the face of the Ministerial Decision and in the Federal Tax Authority's own guide, and it is the most consequential page in UAE corporate tax.

First, the floor

UAE federal corporate tax applies to tax periods commencing on or after 1 June 2023 at 9%, with 0% on the first slice of taxable income. One citation detail, since precision is the whole point of this page: the AED 375,000 threshold is not in Article 3 of the decree-law. Article 3 delegates it; the figure is set by Cabinet Decision No. 116 of 2022.

Separately, a natural person only enters corporate tax where business turnover exceeds AED 1,000,000 in a calendar year, under Cabinet Decision No. 49 of 2023. Wage income, personal investment income and real estate investment income are excluded regardless of amount.

The free zone 0% is conditional, and the condition is the activity

A free zone company reaches 0% only on Qualifying Income, and only as a Qualifying Free Zone Person. The activity lists were rewritten: Ministerial Decision No. 229 of 2025 repealed and replaced Ministerial Decision No. 265 of 2023, retroactively to 1 June 2023. Anything written against the 2023 decision is out of date.

Two filters do the work, and services businesses tend to fail both.

Put those together and the picture for a typical services company is: individuals excluded, mainland companies not qualifying, and what remains is free zone customers. That is a narrow base, and most consultancies do not have it.

The de minimis is less forgiving than it sounds

Non-qualifying revenue must stay at or below 5% of total revenue or AED 5,000,000, whichever is lower. Breach it and the company ceases to be a Qualifying Free Zone Person for that tax period and the four following ones. Five periods.

Why we publish this when competitors do not

Because the alternative is selling you a rate you will not get, and finding out at your first return is a worse experience than finding out now.

And because the number is still good. If you end up paying 9% on profits above the threshold, compare that with 25% corporate tax plus personal tax on distributions in France or Belgium, 27% in South Africa, or a top marginal rate near 60% in Denmark from 2026. Nine per cent, with a clean compliance file, is a strong outcome. It is simply not the same thing as zero, and the structures that reach zero are not the ones usually being sold to consultants.

The part that is actually worth paying someone for

Once you accept that the activity decides the rate, the valuable work moves from incorporation to classification. Specifically:

• which licence category matches what you genuinely do, and what it permits
• who your customers really are — individuals, mainland companies, free zone companies, or outside the UAE — because that mix, not the zone's brochure, determines your rate
• whether a 0% position is reachable at all for your revenue mix, or whether you should plan on 9% and build a clean file instead
• how close you are to the de minimis cliff, and what an unplanned sale would cost
• the sequencing of registration, visa and tax residency certificate, which cannot be issued for a future period

What to do next

Tell us what you sell and who buys it. We will tell you, before you pay anything, whether 0% is realistically available for your revenue mix or whether you should plan on 9%. If the honest answer is that a UAE company does not help you, we would rather say it now.