How JAFZA companies are taxed under UAE corporate tax

What is JAFZA corporate tax treatment?

JAFZA corporate tax treatment refers to how companies registered in the Jebel Ali Free Zone are taxed under UAE Federal Decree-Law 47 of 2022. A JAFZA entity that meets the Qualifying Free Zone Person (QFZP) conditions pays 0% corporate tax on qualifying income and 9% on non-qualifying income above AED 375,000. Companies that fail the conditions are taxed as mainland businesses.

Jebel Ali Free Zone Authority (JAFZA) is one of the UAE's oldest free zones and is a designated zone for VAT purposes. It is included in the free zone framework under the corporate tax law, so the same 0%/9% split applies. To understand where this sits in the wider regime, see our hub on UAE Corporate Tax.

The 0% and 9% rules for JAFZA companies

Every JAFZA company is in scope of UAE corporate tax. The rate it pays depends on whether it is a QFZP and on the type of income earned.

• 0% rate: applies to qualifying income of a QFZP.
• 9% rate: applies to non-qualifying income and to any JAFZA company that fails the QFZP conditions.
• Small business relief: available to entities with revenue up to AED 3 million through 2026, but a company cannot claim both QFZP status and small business relief.

For a deeper look at how the 0% rate works in practice, read our guide to Free Zone 0 Percent Corporate Tax.

How JAFZA fits the free zone definition

JAFZA is recognised as a free zone under Ministerial Decision 265 of 2023 and its successor Ministerial Decisions 243 and 244 of 2025. That means a JAFZA company can be a QFZP if it meets the conditions, the same as companies in DMCC, DIFC, ADGM, or any other listed free zone.

QFZP conditions a JAFZA company must meet

To pay 0% on qualifying income, a JAFZA entity must satisfy all of the following conditions during the tax period.

1. Maintain adequate substance in the UAE, including core income-generating activities in JAFZA.
2. Earn qualifying income as defined by the Ministerial Decisions.
3. Not elect to be taxed at the standard 9% rate.
4. Comply with arm's length and transfer pricing rules, including Master File and Local File where required.
5. Prepare audited financial statements.
6. Stay within the de minimis threshold for non-qualifying revenue.

The de minimis rule is strict. If non-qualifying revenue exceeds the lower of 5% of total revenue or AED 5 million, the company loses QFZP status for that tax period and the next four tax periods. Full details are in our explainer on the Qualifying Free Zone Person UAE rules.

Substance requirements inside JAFZA

Adequate substance means the JAFZA company must actually operate from the free zone. That includes having enough qualified employees, incurring operating expenses in the zone, and holding the right assets to carry out the activity. Outsourcing to a related party in the same zone is allowed if the JAFZA company supervises the outsourced activity.

What counts as qualifying income for a JAFZA company

Qualifying income is set out in Ministerial Decision 265 of 2023 and refined by later decisions. For a JAFZA company, it typically includes the following categories.

Qualifying activities include manufacturing, processing of goods, holding of shares and securities, ship operation, fund and wealth management, headquarter services to related parties, treasury and financing services to related parties, financing and leasing of aircraft, distribution from a designated zone, logistics services, and ancillary activities. JAFZA is a designated zone, so distribution of goods to customers outside the UAE or to UAE customers who import or resell can qualify. For the line between the two buckets, see Qualifying Income vs Non Qualifying Income.

Excluded activities

Some activities are excluded by law and are always taxed at 9%, even if performed by a QFZP. These include transactions with natural persons (with limited exceptions), banking activities, insurance activities, finance and leasing activities (other than treasury and financing to related parties or aircraft leasing), and ownership or exploitation of immovable property other than commercial property located in a free zone transacted with another free zone person.

Worked example: a JAFZA trading company

Assume a JAFZA company distributes industrial equipment from a JAFZA warehouse. In its tax period it earns:

• AED 40,000,000 from sales to free zone customers who use the goods in their own business.
• AED 8,000,000 from exports to customers outside the UAE.
• AED 1,200,000 from retail sales to UAE individuals who are natural persons.

Total revenue is AED 49,200,000. Non-qualifying revenue is AED 1,200,000, which is below 5% (AED 2,460,000) and below AED 5 million. The company stays inside the de minimis threshold.

If all other QFZP conditions are met, the AED 48,000,000 of qualifying income is taxed at 0%. The AED 1,200,000 of non-qualifying income is taxed at 9% on the portion above AED 375,000, giving roughly AED 74,250 of corporate tax for the period.

What happens if de minimis is breached

If retail sales had been AED 6,000,000 instead, non-qualifying revenue would exceed both 5% of total revenue and AED 5 million. The company would lose QFZP status for that period and the next four periods. All taxable income above AED 375,000 would then be taxed at 9%.

How JAFZA compares to other UAE free zones

The corporate tax framework is the same across all listed free zones, but the activity mix tends to differ. JAFZA is heavy on manufacturing, logistics, and distribution. Financial zones are heavier on fund management and headquarter services. The QFZP test still applies the same way.

For zone-specific guides, see DMCC Corporate Tax Treatment, DIFC Corporate Tax Treatment, and ADGM Corporate Tax Treatment.

Compliance steps for JAFZA companies

Every JAFZA entity, including those expecting to pay 0%, must register and file. Skipping registration is not allowed.

1. Register for corporate tax with the Federal Tax Authority (FTA) and obtain a Tax Registration Number (TRN).
2. Prepare audited financial statements for the tax period.
3. Compute qualifying income, non-qualifying income, and the de minimis ratio.
4. Apply transfer pricing rules to all related-party and connected-person transactions.
5. File the corporate tax return within 9 months of the end of the financial year.
6. Pay any tax due by the filing deadline.

For VAT, the standard rate is 5% under Federal Decree-Law 8 of 2017. The mandatory VAT registration threshold is AED 375,000 of taxable supplies; voluntary registration is available from AED 187,500. VAT returns are due within 28 days of the period end. Sources are available on the UAE Ministry of Finance and Federal Tax Authority websites.

E-invoicing readiness for JAFZA companies

The UAE is rolling out a Peppol 5-corner DCTCE (Decentralized Continuous Transaction Control and Exchange) model using the PINT AE format. Phase 1 companies with revenue of AED 50 million or more must appoint an accredited service provider (ASP) by October 30, 2026 and go live on January 1, 2027. SMEs under AED 50 million go live on July 1, 2027, and government entities on October 1, 2027. Penalties under Cabinet Decision 106 of 2025 range from AED 2,500 to AED 50,000 per violation. Official guidance is on the UAE MoF e-invoicing portal.

Common mistakes JAFZA finance teams make

• Assuming a JAFZA licence automatically gives 0% without testing QFZP conditions each year.
• Treating all UAE customers as free zone persons. Status depends on the customer's licence and beneficial use.
• Forgetting that retail sales to natural persons are excluded activities.
• Missing the audited financial statement requirement.
• Ignoring transfer pricing documentation for transactions with the parent or sister companies.
• Not preparing for e-invoicing in good time.

Get the full picture in our UAE Corporate Tax hub before finalising your annual position.

Get ready for UAE corporate tax and e-invoicing

EInvoice Direct is UAE e-invoicing software built by Massive FZCO for businesses in JAFZA and across the UAE. An accredited service provider is included at no extra charge, with native connectors to Zoho Books, QuickBooks, Xero, Tally, Sage, SAP, Oracle NetSuite, Microsoft Dynamics 365, Microsoft Business Central, and Odoo. To get UAE e-invoicing pricing, send us your details and we will reply with a quote tailored to your JAFZA entity.