The UAE has long been known as a tax-free haven, but things changed in 2023 when corporate tax was introduced. However, here's the good news: many businesses still pay 0% tax if structured correctly.
The New Tax Reality
As of June 2023, the UAE implemented a 9% corporate tax on profits exceeding AED 375,000 (approx. $102,000). But there's a catch—many businesses are still legally exempt.
Who Pays 0% Tax in 2025?
1. Free Zone Companies (Qualifying Income)
Free Zone businesses can still enjoy 0% tax if they:
- Maintain adequate substance in the UAE
- Don't conduct business with the UAE mainland
- Comply with all regulatory requirements
2. Small Businesses (Below AED 375,000)
Any business with profits under AED 375,000 pays 0% tax—whether Mainland or Free Zone.
3. Certain Business Activities
Some activities remain fully exempt, including:
- Natural resource extraction
- Businesses owned by UAE or GCC governments
How to Legally Pay 0% Tax
Strategy 1: Set Up in a Free Zone
By operating in a Free Zone and meeting substance requirements, you can maintain 0% tax on qualifying income.
Example:
- An e-commerce business in DMCC selling internationally
- A consultancy in Dubai Silicon Oasis serving global clients
Strategy 2: Keep Profits Below AED 375,000
If you're a startup or small business, staying under the threshold means no corporate tax.
Pro Tip: You can reinvest profits back into the business to stay below the taxable threshold.
Strategy 3: Separate Mainland and Free Zone Operations
Some businesses set up two entities:
- Free Zone for international operations (0% tax)
- Mainland for local sales (9% tax on profits above AED 375,000)
This hybrid model maximizes tax efficiency.
What About Personal Income Tax?
Good news: The UAE still has 0% personal income tax. Whether you're an employee, freelancer, or business owner, you keep 100% of your salary and dividends.
The 2025 Free Zone Tax Update: What Changed?
In 2025, the UAE clarified that Free Zone businesses must meet "economic substance" requirements to qualify for 0% tax. This means:
- Having a physical office (not just a P.O. Box)
- Employing staff in the UAE
- Conducting core business activities locally
Common Myths About UAE Taxes
Myth 1: "All UAE businesses now pay 9% tax"
False. Free Zone companies and small businesses can still pay 0%.
Myth 2: "You need a local partner to avoid tax"
False. You can have 100% foreign ownership and still pay 0% if structured correctly.
Myth 3: "Offshore companies are illegal or shady"
False. Offshore companies are fully legal and widely used for asset holding and international trade.
How Core Bridge Can Help
At Core Bridge, we specialize in tax-efficient business structuring. We'll help you:
- Choose the right setup (Mainland, Free Zone, or Offshore)
- Ensure compliance with substance requirements
- Minimize your tax burden legally
Ready to optimize your taxes? Contact us for a free consultation.
The Bottom Line
The UAE's 0% tax advantage is still real—if you know how to structure your business. Whether you're a startup, SME, or scaling enterprise, there are legal ways to pay little to no tax in 2025.
Don't leave money on the table. Get expert advice and set up your business the right way from day one.