It can pay 0% on some of its income, but that depends on what it trades and who buys it. Sales to other free zone companies can be qualifying income. Sales to mainland or overseas customers qualify only if they fall within a listed qualifying activity.
Who the customer is
Income from a transaction with another free zone company is qualifying income, provided that company is the beneficial recipient and the activity is not excluded. Income from customers outside the free zones, in the mainland or abroad, is qualifying only for a listed qualifying activity. Transactions with individuals are an excluded activity in most cases.
Trading activities on the list
- Trading of qualifying commodities, such as metals, minerals, energy and agricultural commodities with a quoted price. This does not apply if distribution, warehousing, logistics or inventory revenue is 51% or more of revenue.
- Distribution of goods in or from a designated zone. The goods must be imported through that zone and sold to a buyer who resells or processes them.
- Logistics services for others, without taking title to the goods.
Other trading income from non-free zone customers is taxed at 9%. If it exceeds the de minimis limit, the company loses the 0% status. See Who qualifies for the 0% free zone rate?
Substance and treaties
The company must carry out its core income-generating activities in the zone, with adequate staff, assets and spending. A company established for at least 12 months can apply for a UAE tax residency certificate to claim treaty benefits. See When do I need a UAE tax residence certificate, and how do I get one?.
An example
Hiroshi Watanabe runs a Dubai free zone company that buys copper cathodes and sells them to manufacturers in Asia. Copper has a quoted price, his staff and office are in the zone, and he has no warehousing business. His trading can be a qualifying activity. His friend Olga, who is Polish, sells electronics online to individual buyers across the UAE. Sales to individuals are an excluded activity, so her income does not qualify for 0%.
Quick questions
Is general trading a qualifying activity?
No. Only listed activities qualify, such as trading qualifying commodities or distribution from a designated zone under set conditions.
Can a free zone trading company use UAE tax treaties?
A company established for at least 12 months can apply to the FTA for a tax residency certificate to claim treaty benefits.
Sources: Ministerial Decision No. 229 of 2025 on Qualifying Activities and Excluded Activities; Cabinet Decision No. 100 of 2023 on Qualifying Income for the Qualifying Free Zone Person; FTA: Issuance of Tax Certificates for Tax Residency.
General information as at October 2026, not advice. The examples are fictional and simplified, and the rules have conditions and exceptions not covered here. Take advice on your own circumstances, in each country involved, before acting.