“We’re a free zone company on 0% tax. Why would we need to file a return?”
It’s one of the most common questions floating around right now, with the September 30 deadline closing in. And the honest answer is: yes, you almost certainly do. Paying 0% and filing 0 are two completely different things and mixing them up is one of the costliest assumptions a free zone business can make this cycle.
Here’s the quick version, cleared up.
The myth: “0% rate = no filing obligation”
It’s an easy mistake to make. If your income qualifies for the 0% rate, it feels reasonable to assume there’s nothing to report. But the Federal Tax Authority doesn’t see it that way. Filing and paying are two separate obligations, and the first one applies to almost everyone.
Who actually needs to file corporate tax?
Short answer: every registered taxable person, free zone or not.
- Qualifying Free Zone Persons (QFZPs) taxed at 0% on qualifying income still have to file a full return.
- Dormant or inactive entities still have to file – a nil return, but a return nonetheless.
- Businesses below the AED 375,000 threshold still have to file, even with zero tax payable.
There’s no “we didn’t earn much, so we’re exempt” carve-out. The obligation is tied to being a registered taxable person, not to how much (or how little) you made.
Where free zone companies specifically need to be careful?
Getting the 0% rate isn’t automatic just because you’re set up in a free zone. It depends on staying inside the qualifying income rules for your entire tax period and that has to be demonstrated on the return, not assumed.
- Adequate substance in the free zone — real presence, not a mailbox.
- Qualifying Income only — income has to fall within the approved Qualifying Activities (per Ministerial Decision No. 229 of 2025).
- No election out — the entity hasn’t opted into the standard 9% regime instead.
- Transfer pricing compliance — arm’s-length terms and documentation for related-party transactions.
- De minimis threshold — non-qualifying income under 5% of revenue or AED 5M, whichever is lower.
- Audited financial statements — prepared and in place.
The deadline that matters right now!
For any business with a financial year ending 31 December 2025 which covers most UAE companies – both the return and the payment are due by 30 September 2026. Nine months from year-end, no exceptions, and the FTA doesn’t currently offer general extensions.
What happens if you skip it!
- Late filing: AED 500 per month (or part month) for the first 12 months, rising to AED 1,000 per month after that.
- Late payment: 14% per annum, calculated monthly on the outstanding tax.
- For QFZPs specifically: failing to file puts your Qualifying Free Zone Person status at risk – arguably the more expensive consequence, since it affects every future period, not just this one.
The 30-second self-check
Ask yourself these three things:
- Are we a registered taxable person? → File.
- Did we earn zero, or expect 0% tax? → Still file (as a nil return if applicable).
- Are we a QFZP? → File, and confirm the de minimis threshold hasn’t been breached before submitting.
If any of those apply and for most free zone businesses, at least one will – the return is due by 30 September 2026.
How can MS help with Corporate Tax filing?
If any of that raised a flag – a QFZP position you haven’t stress-tested, a dormant entity you’re not sure needs to file, or just a deadline you’d rather not leave to the last week – MS handles the full cycle: reviewing your qualifying income position, preparing and filing the return, and making sure the payment lands with the FTA on time. One conversation now is a lot cheaper than a penalty notice in the future.
