Corporate Tax in the UAE: Who Pays and Who Doesn't
The biggest misconception about tax in the UAE goes like this: "I have a free zone company, so this doesn't concern me." Registration and reporting are mandatory regardless of the rate.
Basic parameters
What "0% for free zones" actually means
The zero rate applies not to the whole company but to qualifying income, and only where substance requirements are met: a genuine presence, staff and expenses within the zone of registration.
Income from dealing with the UAE mainland market generally does not qualify for the relief and is taxed at the standard rate. That is why companies with mixed revenue keep separate accounting records — and this is exactly where problems most often arise during an audit.
Obligations that apply to everyone
- Registration with the Federal Tax Authority — mandatory for every company, including those with no profit
- Filing a return within the set deadline after the end of the financial period
- Keeping and retaining primary documents confirming income and expenses
- Separate VAT registration once the turnover threshold is reached
Missing the registration deadline carries an administrative penalty. This is the most common reason companies set up "turnkey," without ongoing support, end up with charges a year after starting out.
What to do if deadlines have been missed
Register and file the return as soon as possible: the penalty is fixed rather than increasing in proportion to the delay across every category, but delaying increases the risk of further charges. We handle the review of your situation and registration as part of our tax practice.
See also
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