In a world where margins are tight and competition is fierce, international companies are under pressure to streamline their operations and maximise profitability. The UAE’s 0% corporate tax rate can help certain businesses do just that – but how can you qualify and benefit from this strategic advantage?
In the past decade, the UAE has established a reputation as one of the most business-friendly regions in the world for a whole host of reasons, including a strategic location, robust economy and supportive government regulations. Among these advantages, its highly competitive tax regime – one of the most generous on the global stage – is renowned.
As of June 2023, Qualifying FZ companies (also referred to as Qualifying Free Zone Persons) can leverage the 0% corporate tax benefit, empowering international businesses to invest in what truly matters: growth. For companies looking to expand their footprint across borders, this unique opportunity to grow, invest and scale with minimal tax-related hurdles can make all the difference.
But not every business will qualify.
So, let’s take a look at the different types of international companies and specific sectors that can qualify for the 0% tax rate while operating from the UAE’s free zones, and why not all businesses – particularly those offering intellectual services – fit into this model.
Who can benefit from 0% tax?
The UAE’s 0% corporate tax rate is designed to attract international businesses engaged in tangible, economic activities that align with the country’s strategic goals of becoming a global hub for trade, logistics, and innovation. That means that companies in international trading, logistics, manufacturing and certain tech sectors are well-positioned to benefit from this tax incentive.
Take, logistics. An international trading company looking to set up a regional hub or headquarters managing imports and exports from the UAE is exactly the kind of business the 0% tax regime was designed to support. It meets all the requirements explored later in this article while stimulating the local economy by creating jobs, supporting infrastructure and reinforcing the UAE’s role as a trade gateway. Meanwhile, such businesses can benefit from the logistical advantage of moving goods across borders thanks to the UAE’s strategic location and infrastructure, while paying rock-bottom corporate tax rates.
However, industries such as consultancies and professional services are unable to qualify for this tax break because they are not able to meet the specific requirements of designated free zones.
How can businesses qualify for 0% tax?
In order to leverage the 0% corporate tax rate, international businesses must meet a selection of essential requirements.
- Registered in a designated free zone
Businesses need to be registered in one of the UAE’s designated free zones. Not every free zone is eligible for the 0% rate, so we have provided a full list of designated free zones at the end of this article. These free zones all provide the infrastructure and regulatory support for international operations.
- Engaged in a qualified activity
Specific business activities are eligible for the 0% tax rate and Qualifying FZ companies and persons must operate a business within these fields to qualify for the incentive. The Ministry of Finance has provided a detailed list of qualifying activities, which include businesses in:
- Manufacturing of goods or materials
- Processing of goods or materials
- Trading of Qualifying Commodities
- Holding of shares and other securities for investment purposes
- Ownership, management, and operation of Ships
- Reinsurance services
- Fund management services
- Wealth and investment management services
- Headquarter services to Related Parties
- Treasury and financing services to Related Parties
- Financing and leasing of Aircraft
- Distribution of goods or materials in or from a Designated Zone
- Logistics services.
- Any activities that are ancillary to the above Qualifying Activities
Notably, businesses offering intellectual services, such as consultancies, as well as banking, and insurance companies are excluded and will not qualify for the 0% corporate tax rate.
- Demonstrate Economic Substance
Companies must prove they have a real presence in the UAE. For international companies, this involves having an office, staff, and managing operations from the country.
Practical steps for meeting compliance
It is crucial to establish whether your preferred free zone is eligible for the 0% corporate tax incentive. You can contact them directly to confirm or reach out to Creative Zone for the latest details on eligible free zones.
Many companies, particularly those in trading, manufacturing and logistics, can easily show economic substance by setting up regional offices, distribution hubs and warehousing facilities, or optimising their supply chains from the UAE. These international companies are best placed to benefit from the UAE’s strategic location (with easy access to markets in Asia, Europe and Africa), world-class infrastructure including ports and airports and optimised supply chains too. This is more challenging for consultancies and professional services, which often operate without a significant physical footprint.
Choosing the right free zone for your business
Choosing the right free zone is crucial for international businesses seeking to maximise the benefits of the 0% tax incentive. There are currently more than 40 multidisciplinary free zones in the UAE, each strategically located to serve the needs of international companies, providing world-class infrastructure, regulatory support, and industry-specific benefits. However, many are designed to support specific industries, so businesses must align their operational needs with the right location to make the most of the opportunities available.
For instance, DMCC and JAFZA specifically cater to trading and logistics companies with world-class facilities and proximity to major transport hubs, while DAFZA offers quick access to air routes. Some of the largest and most prominent free zones in the UAE include: Dubai International Financial Centre (DIFC), Abu Dhabi Global Market (ADGM), Khalifa Industrial Zone (KIZAD) and Dubai South.
Here is a full list of designated free zones in the UAE. To confirm whether your preferred free zone is eligible for 0% corporate tax, feel free to reach out to our expert team at Creative Zone.
- Masdar City Free Zone (Renewable Energy) – Abu Dhabi
- Dubai Maritime City (Maritime Services) – Dubai
- Sharjah Publishing City – Sharjah
- Hamriyah Free Zone – Sharjah
- Dubai Commercity – Dubai
- Khalifa Port Free Trade Zone (Trade and Logistics) – Abu Dhabi
- Creative City Free Zone (Creative Design) – Fujairah
- Ajman Free Zone (Trade) – Ajman
- Fujairah Free Zone (Trade and Logistics) – Fujairah
- Dubai South (Artificial Intelligence and Futuristic Activities) – Dubai
- Dubai World Trade Centre (Events and Conferences) – Dubai
- Dubai Design District (Creative Design) – Dubai
- Dubai Science Park (Scientific Research) – Dubai
- International Humanitarian City (Humanitarian Hub) – Dubai
- Dubai Multi Commodities Centre (Commodity Trade) – Dubai
- Dubai Outsource City (eCommerce and Support Services) – Dubai
- Dubai Silicon Oasis (Technology, Mixed-use) – Dubai
- Sharjah Media City – Shams (Media) – Sharjah
- Sharjah Airport International Free Zone (Mixed-use) – Sharjah
- Abu Dhabi Airports Free Zone – Abu Dhabi
- Dubai International Financial Centre (Financial Hub) – Dubai
- Abu Dhabi Global Market (Financial Hub) – Abu Dhabi
- Dubai Internet City (Technology) – Dubai
- twofour54 (Media) – Abu Dhabi
- Umm Al-Quwain Free Zone (Mixed-use) – Umm Al Quwain
- Ajman Media City Free Zone (Media) – Ajman
- Meydan Free Zone (Mixed-use) – Dubai
- Dubai Healthcare City (Healthcare) – Dubai
- Dubai International Academic City (Academic) – Dubai
- Dubai Production City (Media) – Dubai
- Dubai Studio City (Media) – Dubai
- Dubai Media City (Media) – Dubai
- DAFZ Industrial Park – Dubai
- The Free Zone Dedicated to the Military and Security Sector in Tawazun Industrial Park – Abu Dhabi
- Dubai Financial Services Authority (DFSA) – Dubai
- Gold & Diamond Park – Dubai
- The Sharjah Research, Technology, and Innovation Park – Sharjah
- Dubai Airport Freezone – Dubai
Conclusion – a strategic choice for international growth
In a world where agility and competitiveness are key, the competitive advantages of the UAE are difficult to ignore. The 0% corporate tax rate, combined with the country’s world-class infrastructure and prime location, makes it an unbeatable choice for global expansion.
By setting up in a free zone, international companies in industries like trading, logistics, and consulting can reduce their tax burden, reinvest profits, and focus on scaling their operations across borders. Now is the time to seize the opportunity and position your business for long-term success in the global market.
If you need guidance on establishing whether your international business is eligible for a 0% corporate tax rate or help setting up global operations, our expert team of advisors at Creative Zone will be happy to help.
