QFZP conditions for UAE Free Zone entities
A condition-by-condition decision module for Free Zone management teams assessing whether income may qualify for the 0% Corporate Tax rate.
- 01Facts
- 02Evidence
- 03Treatment
- 04Approval
Direct answer
A Free Zone licence does not by itself secure a 0% Corporate Tax outcome. A Qualifying Free Zone Person must meet all applicable conditions, including adequate substance, Qualifying Income rules, transfer-pricing compliance, the de minimis limit and audited-financial-statement requirements. Non-qualifying income and failures can create 9% exposure under the applicable rules.
Customer decision questions
Questions management should answer before acting
- 01
Which income streams are Qualifying Income, non-qualifying income or attributable to a permanent establishment?
- 02
Do people, assets, expenditure and core income-generating activities demonstrate adequate substance in the UAE?
- 03
Are any transactions Excluded Activities under the current 2025 decisions?
- 04
Does non-qualifying revenue remain below the lower of AED 5 million or 5% of total revenue for the de minimis test?
- 05
Are related-party dealings arm's length and are required files and disclosures available?
- 06
Are audited financial statements prepared and maintained for the relevant period?
Worked example
Worked example: de minimis screen
- Relevant total revenue for the simplified de minimis calculation: AED 20 million.
- Five percent is AED 1 million; the alternative ceiling is AED 5 million.
- The lower limit is therefore AED 1 million.
Evidence and document checklist
- Entity, licence, Free Zone and activity profile
- Revenue map by customer, counterparty, activity and jurisdiction
- Excluded-activity and Qualifying-Activity analysis
- Substance evidence: people, assets, expenditure and CIGA
- Related-party register, agreements and transfer-pricing support
- De minimis calculation and excluded-revenue reconciliation
- Audited financial statements
- Permanent-establishment, immovable-property and intellectual-property analysis where relevant
Decision path
- 1
Map income
Trace each stream to the counterparty, activity and applicable Qualifying Income rule.
- 2
Test conditions
Review substance, transfer pricing, audit and election status together.
- 3
Calculate
Prepare the de minimis schedule and identify income potentially exposed to 9%.
- 4
Document
Record positions, evidence gaps, approvals and the return treatment.
Client responsibilities
- • Management provides complete revenue, contract, related-party and operating information.
- • Management arranges the required audit and approves tax positions.
- • The entity maintains substance and evidence throughout the Tax Period.
Professional boundaries
- • No QFZP status, 0% rate or authority outcome is guaranteed.
- • Legal, customs, regulated-activity and audit opinions require the appropriate specialists.
- • The qualifying and excluded activity rules can change and must be checked for the relevant period.
Questions and concise answers
Does every UAE Free Zone company qualify for 0% Corporate Tax?+
No. The 0% rate applies to Qualifying Income of a Qualifying Free Zone Person that meets all applicable conditions. A Free Zone licence alone is insufficient.
What is the QFZP de minimis limit?+
The general screen is that non-qualifying revenue must not exceed the lower of AED 5 million or 5% of total revenue, subject to the detailed revenue rules and exclusions.
Does a QFZP need audited financial statements?+
Yes. Current FTA guidance states that a Free Zone Person seeking QFZP treatment must prepare and maintain audited financial statements regardless of revenue.
Can a Free Zone Person have income taxed at 9%?+
Yes. Depending on the facts and applicable rules, non-qualifying income and income attributable to certain permanent establishments or other specified sources may be subject to 9%. A failure to meet QFZP conditions can have wider consequences.
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