Corporate Tax for Free Zone E-commerce Sellers in the UAE: Qualifying Income, Consumer Sales and the De Minimis Test

A free zone company that sells online mostly to consumers should not assume a 0% corporate tax rate. A Qualifying Free Zone Person pays 0% only on Qualifying Income and 9% on its other taxable income, as of October 2026. Ministerial Decision 229 of 2025 lists any transaction with a natural person as an Excluded Activity, with exceptions that do not cover retail goods. This page explains what that means for a free zone seller, and what the FTA does not say.

What is the free zone corporate tax rule in one view?

Every free zone company is a taxable person for corporate tax. A free zone company that meets all the conditions becomes a Qualifying Free Zone Person (QFZP) and is taxed at:

• 0% on its Qualifying Income, and
• 9% on its taxable income that is not Qualifying Income.

A QFZP does not get the standard 0% band on the first AED 375,000 of taxable income. A company that is not a QFZP is taxed under the standard rules. Registration is required either way; see corporate tax registration penalty.

What counts as Qualifying Income?

Cabinet Decision 100 of 2023 lists four categories of Qualifying Income:

1. Income from transactions with another Free Zone Person, except income from Excluded Activities.
2. Income from transactions with a person outside the free zones, but only for Qualifying Activities that are not Excluded Activities.
3. Income from qualifying intellectual property.
4. Any other income, if the de minimis requirements are met.

The income must also not be attributable to a permanent establishment or come from immovable property.

Which activities qualify, and which are excluded?

Ministerial Decision 229 of 2025 sets the lists. It was issued on 28 August 2025 and repeals Ministerial Decision 265 of 2023.

The Decision defines distribution narrowly. The goods must be imported through a Designated Zone and supplied to a customer who resells, processes or alters them for sale, or to a public benefit entity. Designated Zones are a VAT concept too; see VAT designated zone for free zone sellers.

The Decision's Excluded Activities start with "any transactions with natural persons", other than those linked to ships, fund management, wealth and investment management and aircraft financing and leasing.

Is a free zone online store's consumer revenue Qualifying Income?

On the text of the Decision, no. A natural person is an individual, and sales of goods to individuals are not in the list of exceptions. The FTA guide gives a parallel example: a restaurant in a free zone whose sales to natural persons are an Excluded Activity that gives rise to non-qualifying revenue. The guide does not give an e-commerce example, and the FTA has not published a ruling on online stores that we could find. That is a gap in what is published, not a green light. The guide is dated May 2024 and cites the earlier Ministerial Decision 265 of 2023; the replacement Decision 229 of 2025 keeps "any transactions with natural persons" as an Excluded Activity.

What this means in practice:

• Business-to-business sales to other free zone companies can be Qualifying Income if the buyer is the beneficial recipient of the goods and the activity is not excluded.
• Business-to-business sales to mainland companies qualify only if the activity is a Qualifying Activity, and ordinary reselling of goods to a mainland retailer does not appear in the list above unless it fits one of those entries.
• Consumer sales on Amazon.ae, noon or your own site are sales to natural persons, so they are Excluded Activity revenue.

For the licensing side of selling from a free zone to the mainland, see can a free zone company sell in mainland UAE.

What is the de minimis test?

A QFZP can have some non-qualifying revenue without losing the 0% rate. The test is met when non-qualifying revenue in the tax period does not exceed 5% of total revenue or AED 5,000,000, whichever is lower.

Illustrative example, built from that rule. A free zone seller has AED 2,000,000 of total revenue in a tax period. The cap is the lower of 5% of AED 2,000,000, which is AED 100,000, and AED 5,000,000, so AED 100,000. If consumer sales are AED 600,000, non-qualifying revenue is far above the cap and the test fails. The FTA guide also describes revenue that is left out of the calculation, such as revenue attributable to a domestic permanent establishment and income from certain immovable property in a free zone, so a real calculation needs the guide.

What else must a QFZP do?

The Decision adds that non-qualifying revenue must meet the de minimis test and that the company must prepare audited financial statements. The FTA guide also lists adequate substance in a free zone, no election to be taxed under standard rules, and compliance with the arm's length principle.

A QFZP that fails any condition stops being a QFZP from the start of that tax period and for the following four tax periods. One bad year can cost five years of 0% treatment, so the test is worth modelling before you launch a consumer channel.

What if your sales are mostly to consumers?

The published rules point to ordinary corporate tax treatment once you are not a QFZP: the standard rules include a 0% rate on taxable income up to AED 375,000 and 9% above it. The FTA guide says Small Business Relief is not available to a QFZP. The separate small business relief guide covers relief for companies that are not a QFZP. Whether a free zone license or a mainland license is better for your sales mix is covered in free zone vs mainland for e-commerce.

FAQ

Do free zone e-commerce companies pay corporate tax in the UAE? Yes, they are taxable persons. A Qualifying Free Zone Person pays 0% on Qualifying Income and 9% on its other taxable income, and a company that fails the conditions is taxed under the standard rules.

Is selling on Amazon.ae from a free zone Qualifying Income? Sales to individual customers are transactions with natural persons, which Ministerial Decision 229 of 2025 treats as an Excluded Activity. They count as non-qualifying revenue. Confirm your own facts with a tax adviser.

What is the de minimis threshold for free zone companies? Non-qualifying revenue may not exceed the lower of 5% of total revenue or AED 5,000,000 in the tax period.

Do I still need to register for corporate tax if my company is in a free zone? Yes. A new company, including a free zone person, must apply within three months of incorporation,, and a late application attracts an AED 10,000 penalty.

Can I elect to be taxed normally instead of as a QFZP? The FTA guide states that a free zone person can elect to be subject to the standard rules, and that an election has the same loss of status for the following four tax periods as a failure.

Does the free zone authority decide my corporate tax rate? No. The rate follows the FTA rules and your own revenue. Free zone authorities issue licenses; the FTA administers corporate tax.

Is VAT affected by the same free zone status? Corporate tax and VAT are separate. A free zone license does not by itself remove VAT, and the Designated Zone concept applies only in limited cases. See the VAT designated zone guide.

This is general information, not tax or legal advice. Confirm your position with the Federal Tax Authority or a registered tax agent.

What to do next

Split last year's revenue into free zone customers, mainland businesses, and consumers, then test it against the 5% cap before you pick a zone or a channel plan. Take the result to a registered tax agent. For the marketplace side, Blooprint, an Amazon SPN verified partner, offers Amazon.ae account management and noon account management.