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Qualifying Free Zone Person: status

Applies
FY2024 onwards
Reviewed
Rule
UAE-CT-QFZP-2024.1
By

What are the conditions to be a Qualifying Free Zone Person?

Substance, Qualifying Income, no standard rate election, transfer pricing compliance, the de minimis and audited accounts. Failing one costs five tax periods.

Per Federal Decree-Law No. 47 of 2022, Articles 3(2), 18 and 19, Qualifying Free Zone Person, and the election

A Free Zone Person is a Qualifying Free Zone Person — taxed at 0% on its Qualifying Income and 9% on its other Taxable Income — where it meets all six conditions: it maintains adequate substance in the State, derives Qualifying Income, has not elected to be subject to Corporate Tax at the standard rates, complies with Articles 34 and 55, keeps its non-qualifying Revenue within the de minimis, and prepares audited financial statements. Failing any of them at any time in a Tax Period ends the status from the beginning of that period and for the subsequent four.

Qualifying Free Zone Person status is what gives a Free Zone Person the 0% rate. There is no 0% band on its other income: Article 3(2) taxes its non-qualifying Taxable Income at 9% from the first dirham. Losing the status costs five Tax Periods, not one.

The conditions

All of the following must be met

  • Maintains adequate substance in the Free Zone
  • Derives qualifying income
  • Has not elected to be subject to the standard Corporate Tax rate
  • Complies with the arm's length principle and transfer pricing documentation
  • Meets the de minimis requirement
  • Prepares audited financial statements

Order of testing

  1. 1

    Inputs requiring your determination

    Any input a person must decide and has not decided stops the computation. An undecided input is never read as a no.

  2. 2

    Free Zone Person

    The regime applies only to a Free Zone Person — one incorporated or registered in a Free Zone.

  3. 3

    Each condition

    Every condition must be met. The first that fails is reported, so a reader knows which one to look at; where all are met, the person is a Qualifying Free Zone Person.

Examples

Illustrative scenarios — ours, not the authority’s — each computed live by this rule. Change any fact and the outcome is the rule’s, not a hand-written answer.

All conditions met

A Free Zone company with real substance in the zone, qualifying income within the de minimis, full transfer pricing compliance and audited accounts, that has not elected the standard rate.

Computed

A Qualifying Free Zone Person as computed: every condition is met, so qualifying income is within the 0% rate, based on the determinations you supplied.

Decided by the all conditions met

De minimis failed

The same company, but its non-qualifying revenue exceeds the de minimis ceiling for the period.

Computed

Not a Qualifying Free Zone Person as computed: the condition on de minimis requirement is not met, based on the determination you supplied. Under Article 5(2) of Ministerial Decision No. 229 of 2025 a person failing a condition at any time in a Tax Period ceases to be a Qualifying Free Zone Person from the beginning of that period and for the subsequent four Tax Periods, and its Taxable Income is taxed under Article 3(1).

Decided by the de minimis requirement

Try it

Supply the facts and this rule computes the outcome in your browser, live. Leave a determination undecided and it blocks the result — it is never read as a no.

Not computed yet

1 input still need your determination:

  • Is the person a Free Zone Person (incorporated or registered in a Free Zone)?

Computed in your browser from the figures you supply. Nothing is sent anywhere, and the result is a computation against a rule — reference, not tax advice.

Sources

Share this rule

Reference, not tax advice.

Pankaj Agarwal — Tax Technology Leader