Same profit, mainland 9% versus a Qualifying Free Zone Person.
Free zone saving
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Mainland tax
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Free zone tax
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Two ways the same profit gets taxed
When founders ask whether to register on the mainland or in a free zone, corporate tax is usually near the top of the list. This tool puts the two routes side by side on an identical profit so you can see the gap, not guess at it. On the mainland the rule is simple: a generous slice is taxed at zero and the rest at the standard rate. A Qualifying Free Zone Person works on a different principle entirely, splitting profit into qualifying and non-qualifying income and taxing only the latter. The Federal Tax Authority oversees the mainland regime, while the rules that decide what counts as qualifying income sit with the corporate tax framework and the relevant free-zone authority for your zone.
Why the free zone is not automatically cheaper
The mainland gives every business a zero-rate band, the first AED 375,000 of taxable income, before the rate kicks in. As modelled here that rate is 9 percent. A Qualifying Free Zone Person gets no such band on its non-qualifying income; that income is taxed at the full rate from the first dirham, while qualifying income is charged at 0 percent. So the free zone wins decisively when almost all your income qualifies, but as the non-qualifying share climbs, the mainland’s zero band starts to claw back the advantage. These are the rates and thresholds this calculator applies; confirm the current figures and the qualifying-income definitions with the FTA and your free-zone authority, because this area is detailed and evolving.
A million dirhams of profit, 80 percent qualifying
Take AED 1,000,000 of profit with 80 percent qualifying as free-zone income. The rates this calculator applies give a mainland bill of AED 56,250 against a free-zone bill of AED 18,000, a saving of AED 38,250 by going the free-zone route, assuming qualifying status and the de minimis test are met.
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The two bars below contrast the bills directly.
The de minimis test that can void the whole benefit
Here is the part that catches people out. Free-zone status is not a switch you flip once. To keep the 0 percent rate on qualifying income, a Qualifying Free Zone Person must keep non-qualifying revenue below a de minimis ceiling. Breach it, and the business can lose qualifying status for the period entirely, at which point its whole profit is taxed at the standard rate with no zero-rate band, the worst of both worlds. There are also economic substance requirements: real people, real premises, real activity in the zone. This calculator assumes qualifying status holds, so treat its saving as the best case, conditional on you actually meeting those rules.
Look past the tax line before deciding
Tax is one input, not the decision. Free zones restrict where and to whom you can sell, which is why income earned from mainland UAE customers is often non-qualifying. If your customers are mostly inside the UAE mainland, a free-zone licence may force more of your income into the taxed bucket than you expect, shrinking the saving this tool shows. Weigh setup costs, visa allocations, and market access alongside the tax figure. The tool is for founders and finance leads scoping a structure, and for existing businesses pressure-testing whether their qualifying-income share still earns its keep.
What actually counts as qualifying income?
Broadly, it tends to be income from transactions with other free-zone businesses and certain qualifying activities, rather than sales to mainland UAE customers, but the precise list and conditions are defined in the corporate tax rules and can change. Because misclassifying income is what triggers the loss of status, this is the one figure worth getting professional confirmation on rather than estimating. Verify with the FTA and your free-zone authority.
If most of my income is non-qualifying, is the mainland better?
Often yes. As the non-qualifying share rises, the free-zone bill climbs while the mainland keeps its zero-rate band working in your favour. Set the qualifying share low in the tool and you will see the saving narrow and eventually flip, at which point the mainland’s AED 375,000 band makes it the cheaper home for that profit.