A free-zone licence has never bought the 0% rate on its own.
The change
UAE corporate tax has applied since 2023, and the 0% free-zone rate was conditional on substance from the start — it was never a property of the licence. What changed in 2025 is that the qualifying-activity list narrowed and the audit expectation tightened. The Federal Tax Authority's position is consistent throughout: preferential treatment depends on demonstrable activity inside the country — physical presence proportionate to the business model, qualified employees resident here, and operating expenditure actually incurred locally.
Two things catch people out. A company that qualifies for 0% must still register and file an annual corporate tax return — the rate is not an exemption from the process, and late filing carries penalties. And audited financial statements are part of claiming it. Size does not exempt you.
What it means if you are entering
If your UAE entity exists to hold a licence and little else, the structure costs you more than it saves. Substance is built at formation. Retrofitting it the month before a filing rarely convinces anyone.
Practically: choose the freezone for the activity you will genuinely conduct, budget for a real desk and a real hire from day one, and put the filing calendar in the entry plan. Most companies discover it in year two, from an accountant, after a penalty.
- Federal Tax Authority — Corporate Tax: Free Zone Persons
- Federal Tax Authority — Corporate Tax Guide on Free Zone Persons
Qualifying activities, substance tests and filing dates change. Confirm the current position with the FTA, or with us, before relying on it.