UAE Corporate Tax for Offshore Companies (RAK ICC, JAFZA Offshore & Ajman Offshore)

Are offshore companies in the UAE, like those incorporated through RAK ICC or JAFZA Offshore, subject to corporate tax? The answer is no longer a simple yes or no. TThis article clarifies the updated 2026 rules under UAE corporate tax law and explains when offshore entities may be taxed, and when they may have a 0% outcome in practice (either because their taxable income stays within the 0% band, or because a separate 0% Free Zone regime applies to qualifying income in specific cases).

Key Takeaways

• Offshore companies are within the scope of UAE Corporate Tax.    
• A 0% tax rate is possible, but it depends on the company’s exact status and income profile (for most taxable persons, taxable income up to AED 375,000 is taxed at 0%; Free Zone relief is a separate 0% regime for qualifying income if conditions are met).    
• Mainland-facing (non-qualifying) income is not automatically “taxed at source” — instead, Corporate Tax is applied to taxable income, with 9% generally applying to taxable income above AED 375,000, and different rules applying to Qualifying Free Zone Persons.    
• Corporate Tax registration and annual tax return filing are part of the compliance baseline. ESR reporting is no longer required for financial years ending after 31 December 2022, but legacy ESR periods may still require proper records and closure.

Why This Matters Now

When the UAE introduced federal corporate tax in June 2023, there was significant uncertainty about whether offshore companies, especially those registered in jurisdictions like RAK ICC or JAFZA Offshore, would fall under the new tax rules.

As of 2026, the rules and how they apply have been clarified. Offshore company owners now need to reevaluate their structures and obligations to remain compliant and avoid unexpected penalties.

What Is an Offshore Company in the UAE?

In the UAE, an offshore company typically refers to an entity incorporated under an “offshore” regime (e.g., RAK ICC, JAFZA Offshore, Ajman Offshore) that is generally restricted from conducting onshore business in the UAE (such as contracting with UAE mainland customers), and is primarily used for holding and international structuring purposes. Common offshore jurisdictions include:

• RAK ICC (Ras Al Khaimah International Corporate Centre)
• JAFZA Offshore (Jebel Ali Free Zone Authority)
• Ajman Offshore

These companies are often used for:

• International trading
• Holding shares or intellectual property
• Global investment and wealth planning
• Real estate ownership (where permitted under the relevant emirate / authority rules)

Does UAE Corporate Tax Apply to Offshore Companies?

Yes, but the application depends on the nature of the company’s income and compliance with specific conditions.
Offshore companies are legally considered UAE-incorporated entities, and are therefore within the scope of corporate tax. However, they may qualify for a 0% tax rate if they meet the requirements of a Qualifying Free Zone Person (QFZP).

Important nuance: an “offshore company” is not automatically a “Free Zone Person” for Corporate Tax purposes, and QFZP treatment is only available where the entity is actually eligible as a Free Zone Person and meets all conditions.

What Is a Qualifying Free Zone Person?

A Qualifying Free Zone Person (QFZP) is a company that meets the following criteria:

1. Incorporated in (or registered as) a Free Zone Person under the Corporate Tax rules (not simply branded as “offshore”)
2. Maintains adequate economic substance in the UAE
3. Does not elect to be taxed under the standard regime
4. Earns only qualifying income, such as:
   • Income from other free zone entities
   • Foreign-sourced income
   • Certain passive income may be treated as qualifying or exempt in specific cases, but classification depends on the detailed rules and conditions

Where non-qualifying income exists (including most mainland-facing revenue), it is handled under the Corporate Tax rules (including de minimis considerations and potential loss of QFZP status).

Once a company earns any income from the UAE mainland, it risks disqualification and becomes subject to the standard 9% corporate tax rate on taxable income over AED 375,000.

What Happens If You Don’t Qualify?

If your offshore company does not meet the QFZP conditions (or is not eligible to be treated as a QFZP), then it will be treated as a regular taxable entity, subject to 9% tax on profits exceeding AED 375,000, and required to file corporate tax returns.

(In this standard regime, taxable income up to AED 375,000 is taxed at 0%, and the excess is generally taxed at 9%.)

Common Misconceptions in 2026

Economic Substance Requirements (ESR)

As of 2026, ESR reporting is no longer required for financial years ending after 31 December 2022.

However, if your entity had ESR obligations for earlier financial years, you should keep the supporting documentation in order and ensure those legacy obligations were properly addressed.

Separately, “substance” remains relevant under Corporate Tax in practice — especially where you aim to support Free Zone treatment, manage Permanent Establishment risk, or handle cross-border structures.

What Should Offshore Companies Do Now?

If you own or manage an offshore company in RAK ICC, JAFZA Offshore, or similar jurisdictions, here are the next steps:

1. Confirm the entity’s Corporate Tax status (resident / non-resident, and whether it is eligible to be treated as a Free Zone Person at all). 
2. Map income streams and counterparties (mainland vs Free Zone vs foreign), and identify any “non-qualifying” revenue risk.
3. Plan your compliance baseline: registration, bookkeeping, financial statements, and a Corporate Tax return within the required timeline.
4. Review your corporate tax exposure