5 Secret issues ! UAE Free Zone Corporate Tax -2025
UAE Corporate Tax Law 2025 is here, and Free Zone entities must know the truth! In this video, we reveal 5 secret issues Free Zone businesses face under UAE CT Law
UAE CORPORATE TAX -2025
CA M.F.KHAN
7/5/20252 min read


UAE Corporate Tax: 5 Hidden Secrets Every Free Zone Business Must Know
By CAMF KHAN | UAE Tax Advisory | www.camfkhan.com
With the implementation of the UAE Corporate Tax Law, Free Zone businesses are under increasing scrutiny. While many believe that operating in a Free Zone means "automatic tax exemption", the reality is more nuanced. This blog uncovers 5 lesser-known facts about Free Zone taxation that can save you from costly mistakes — especially if you’re aiming for QFZP (Qualifying Free Zone Person) status.
✅ 1. Are Free Zone Entities Exempt from Corporate Tax Registration?
No. Every Free Zone Person (FZP) must register for UAE Corporate Tax, whether or not they are subject to the 0% or 9% tax rate. Even entities claiming QFZP status are required to file annual tax returns.
👉 Non-registration = Penalty Risk.
FTA mandates all Free Zone businesses to obtain a Tax Registration Number (TRN).
🔄 2. Can Free Zone Entities Elect for Small Business Relief?
Yes — but it comes with serious consequences.
If your Free Zone business has annual revenue below AED 3 million, you may elect Small Business Relief. However:
🚫 You will lose QFZP status.
❌ You cannot claim the 0% corporate tax rate for that tax year and the next 4 years.
💡 Choosing short-term savings can cost long-term tax exemptions.
🧾 3. Can Free Zone Entities Carry Forward Tax Losses?
Yes, but only if they are taxable at 9%.
A Free Zone Person that is not a QFZP can carry forward business losses to offset future taxable income. But QFZPs, enjoying the 0% rate, cannot claim or carry forward tax losses — because there’s no tax to offset.
👥 4. Can a Free Zone Entity Join a Tax Group?
Only if it gives up QFZP status.
To join a Tax Group, a Free Zone entity must:
Be subject to 9% corporate tax.
Forfeit its QFZP classification.
QFZPs are strictly excluded from Tax Group participation under UAE CT law.
📚 5. Understanding the Difference: Free Zone vs. FZP vs. QFZP
Let’s clarify:
Term Meaning Free Zone A special economic area with its own regulatory and tax incentives.FZP (Free Zone Person)Any business entity established in a Free Zone (taxable or exempt).QFZP (Qualifying Free Zone Person)An FZP that meets strict conditions to enjoy 0% CT.
🛡️ QFZP Conditions Include:
Adequate economic substance in UAE
Earning only Qualifying Income
Not opting for Small Business Relief
Not joining a Tax Group
Transfer pricing documentation and audited financials
Not exceeding De Minimis thresholds (5% or AED 5M for non-qualifying income)
⚠️ If any condition is breached, QFZP status is revoked, and the entity is taxed at 9% for the full period.
🎯 Conclusion: Strategic CT Planning Is Critical
Your Free Zone location does not automatically guarantee 0% corporate tax. The UAE CT Law is structured to reward compliant businesses and penalize improper elections or structuring.
👉 At www.camfkhan.com, we help Free Zone companies:
Register for Corporate Tax
Assess and maintain QFZP eligibility
Structure tax-efficient business models
Avoid penalties and lost tax benefits
📞 Need a Consultation?
Reach out to our experts today and secure your 0% tax status the smart way.
🔗 Visit: www.camfkhan.com


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