Tax
UAE corporate tax for DIFC entities
Federal Decree-Law No. 47 of 2022 and implementing decisions
In short
DIFC entities are inside the UAE corporate tax net. The headline rate is 9 per cent on taxable income above AED 375,000. Because the DIFC is a designated Free Zone, a DIFC entity that meets the Qualifying Free Zone Person conditions pays 0 per cent on its Qualifying Income and 9 per cent on the rest. Registration and annual filing are mandatory whether or not tax is payable.
- Instrument
- Federal Decree-Law No. 47 of 2022 and implementing decisions
- In force
- Financial years beginning on or after 1 June 2023
- Regulator
- Federal Tax Authority
- Applies to
- Every DIFC company, branch, partnership and foundation carrying on a business, including entities with no taxable income.
What it requires
| Obligation | What it means in practice |
|---|---|
| Register for corporate tax | With the Federal Tax Authority, by the deadline that applies to the entity's licence issue date. |
| File an annual return | Within nine months of the end of the tax period, even where the result is nil. |
| Maintain audited financial statements | Required to claim Qualifying Free Zone Person status. |
| Apply transfer pricing rules | Arm's length pricing on related party and connected person transactions, with documentation where thresholds are met. |
| Demonstrate adequate substance | Core income generating activities carried out in the Free Zone, with adequate assets, staff and expenditure. |
Deadlines
| Item | When |
|---|---|
| Corporate tax registration | By the FTA deadline tied to licence issue date |
| Annual return and payment | Within 9 months of the end of the tax period |
| Transfer pricing documentation | Prepared by the filing date, produced on request within 30 days |
| Record retention | 7 years |
If you get it wrong
The 0 per cent rate is conditional, not automatic
Being in the DIFC does not by itself produce a zero rate. The entity must be a Qualifying Free Zone Person, which requires adequate substance in the Free Zone, income that falls within the qualifying categories, compliance with the de minimis rule, arm's length transfer pricing and audited financial statements. Fail any one and the whole entity pays 9 per cent.
Qualifying Income broadly covers transactions with other Free Zone Persons and specified qualifying activities carried out with anyone. Non-qualifying revenue is permitted within the de minimis limit, which is the lower of 5 per cent of total revenue or AED 5 million. Cross that line and status is lost for the current period plus the next four.
Qualifying activities that matter in the DIFC
The Cabinet and Ministerial Decisions list the activities that qualify. Several map directly onto the DIFC population: fund management regulated by the competent authority, wealth and investment management regulated by the competent authority, holding of shares and other securities for investment purposes, headquarter services to related parties, treasury and financing services to related parties, and reinsurance.
Two points catch firms out. Regulated fund and wealth management qualifies only where it is regulated by the competent authority, which means a DFSA Licence and not a general commercial licence. And advisory or consultancy income from non-Free Zone clients is generally not a qualifying activity, which is why many DIFC consultancies simply accept the 9 per cent rate.
Excluded activities
Some income is excluded from the qualifying regime regardless of the counterparty. That includes income from a domestic or foreign permanent establishment, income from immovable property other than commercial property located in a Free Zone and transacted with a Free Zone Person, and income from intangible assets beyond the limited exception.
Transactions with natural persons are excluded except for specific activities such as fund management and wealth management. A DIFC wealth manager serving individual clients can stay inside the regime. A DIFC consultancy invoicing individuals cannot.
Registration and filing apply to everyone
There is no exemption from registration because an entity is dormant, a holding vehicle or expects to pay nothing. Every DIFC entity carrying on a business registers with the FTA and files annually. Prescribed Companies and Foundations are included.
Filing sits nine months after the end of the tax period. For a December year end, that means the following September. Build it into the same calendar as the audit, because the audited accounts are a prerequisite for claiming the zero rate.
Common questions
Do DIFC companies pay corporate tax?
They are within the regime. A DIFC entity that meets the Qualifying Free Zone Person conditions pays 0 per cent on Qualifying Income and 9 per cent on anything else. An entity that does not meet the conditions pays 9 per cent on taxable income above AED 375,000.
What is the de minimis rule?
Non-qualifying revenue must stay below the lower of 5 per cent of total revenue or AED 5 million. Exceed it and the entity loses Qualifying Free Zone Person status for that tax period and the following four tax periods.
Does a DIFC holding company qualify for 0 per cent?
Holding shares and other securities for investment purposes is a qualifying activity, so a properly structured holding vehicle can qualify. It still needs adequate substance, audited accounts and compliance with the other conditions, and the shares have to be held for at least twelve months.
Is corporate tax registration mandatory for a dormant DIFC entity?
Yes. Registration and annual filing apply regardless of whether any tax is due. Late registration attracts a penalty on its own.
Check the source
This page summarises the position as at September 2026. Laws and regulations change. The authoritative text is published by the regulator: Federal Tax Authority. Nothing here is legal advice.Compliance is a calendar, not a project
Six recurring obligations across four different bodies, and nobody sends a reminder. We track them for DIFC entities so renewal is never the moment you discover a gap.