Free Zone Corporate Tax Eligibility UAE — Qualifying Free Zone Person (QFZP) Assessment

Free Zone companies in the UAE are subject to UAE Corporate Tax, but may qualify for a 0% Corporate Tax rate on their Qualifying Income if they meet the conditions for Qualifying Free Zone Person (QFZP) status under Article 18 of Federal Decree-Law No. 47 of 2022 on the Taxation of Corporations and Businesses. At Abdelhamid & Co. Certified Public Accountants & Auditors L L C SP, we are licensed by the UAE Ministry of Economy (Local Auditors Record No. LC0106-01) and registered as a licensed FTA Tax Agent (TAN: 30003958 | TAAN: 20033908). We help Free Zone businesses across the UAE assess, achieve, and maintain QFZP status.

We offer a full range of Corporate Tax services in the UAE, including Corporate Tax Return Filing, Corporate Tax Compliance Review, and External Audit services (mandatory for QFZP). Learn more about our firm and our team.

What is a Qualifying Free Zone Person (QFZP)?

A Qualifying Free Zone Person is a Free Zone entity that meets all conditions under Article 18 of the Corporate Tax Law and is entitled to a 0% Corporate Tax rate on its Qualifying Income. Non-Qualifying Income is taxed at the standard 9% rate. The QFZP regime is one of the most valuable benefits available to UAE Free Zone businesses, but maintaining it requires careful ongoing compliance.

To qualify as a QFZP, a Free Zone entity must meet ALL of the following conditions:

• Maintains adequate substance in the UAE Free Zone — staffing, assets, and core income-generating activities
• Derives Qualifying Income as defined in Cabinet Decision No. 55 of 2023
• Has not made an election to be subject to the standard Corporate Tax rules
• Complies with the de minimis non-qualifying revenue rule — non-qualifying revenue must not exceed the lower of AED 5 million or 5% of total revenue
• Prepares audited financial statements — as licensed Ministry of Economy auditors, we can provide this as an integrated service
• Complies with UAE Transfer Pricing rules for transactions with Related Parties and Connected Persons

What is Qualifying Income for a Free Zone Company?

Under Cabinet Decision No. 55 of 2023, Qualifying Income for a Free Zone company includes:

• Income from transactions with other Free Zone Persons (that are not Excluded Activities)
• Income from Qualifying Activities conducted with persons outside the Free Zone (as defined in the Cabinet Decision)
• Any other income meeting the conditions prescribed by the FTA

Income from Excluded Activities — such as transactions with UAE mainland persons involving certain goods or services — and income exceeding the de minimis threshold is taxed at 9%. Correctly mapping your income streams is critical to maintaining QFZP status.

Our Free Zone Corporate Tax Eligibility Services

1. QFZP Eligibility Assessment

We conduct a comprehensive assessment of your Free Zone company's eligibility for QFZP status — reviewing your activities, income streams, substance arrangements, and compliance with all Article 18 conditions. We work with entities in JAFZA, DMCC, ADGM, RAKEZ, SAIF Zone, and all major UAE Free Zones.

2. Qualifying vs Non-Qualifying Income Analysis

We map your revenue streams to identify which income is Qualifying Income (taxed at 0%) and which is Non-Qualifying Income (taxed at 9%), and assess whether your de minimis threshold is maintained. This analysis is the foundation of your QFZP Corporate Tax planning.

3. Substance Review

We review your Free Zone economic substance — including staffing, assets, and core income-generating activities — to assess whether you meet the adequate substance requirement under Article 18 and identify any gaps that could jeopardise QFZP status.

4. QFZP Maintenance & Ongoing Compliance

We provide ongoing advisory to help you maintain QFZP status year-on-year, including monitoring changes to your business activities, income streams, and any regulatory updates from the FTA. Losing QFZP status means all income becomes taxable at 9% — prevention is far more cost-effective than remediation.

5. Corporate Tax Return Filing for Free Zone Companies

As a licensed FTA Tax Agent (TAN: 30003958), we prepare and file Corporate Tax Returns for Free Zone companies via the EmaraTax portal, correctly applying the 0% rate to Qualifying Income and 9% to Non-Qualifying Income, with all required disclosures.

6. Audited Financial Statements for QFZP

Audited financial statements are a mandatory condition for maintaining QFZP status. As auditors licensed by the UAE Ministry of Economy (LC0106-01), we provide the required external audit as part of an integrated QFZP compliance service.

Why Choose Abdelhamid & Co for Free Zone Corporate Tax in the UAE?

• Licensed by the UAE Ministry of Economy — Local Auditors Record No. LC0106-01
• Licensed FTA Tax Agent — TAN: 30003958 | TAAN: 20033908
• Deep expertise in Free Zone corporate tax rules and QFZP conditions under Article 18
• Experience with JAFZA, DMCC, ADGM, RAKEZ, SAIF Zone, and other UAE Free Zones
• Integrated service: QFZP assessment + external audit + CT return filing via EmaraTax
• Serving Free Zone companies across all UAE Emirates
• Bilingual team — Arabic and English

Frequently Asked Questions — Free Zone Corporate Tax Eligibility UAE

Are Free Zone companies exempt from UAE Corporate Tax?

No. All Free Zone companies are subject to UAE Corporate Tax and must register with the FTA. However, those that qualify as Qualifying Free Zone Persons (QFZP) are eligible for a 0% rate on their Qualifying Income. Non-Qualifying Income remains taxable at 9%.

What happens if I fail the de minimis rule?

If your Non-Qualifying Income exceeds the lower of AED 5 million or 5% of total revenue, you lose QFZP status for that entire Tax Period and all income becomes taxable at 9%. Careful revenue monitoring and a compliance review before year-end is essential.

Do Free Zone companies need audited financial statements for QFZP?

Yes. Audited financial statements are a mandatory QFZP condition under Article 18. As licensed Ministry of Economy auditors, we provide the required external audit as part of an integrated QFZP compliance package.

What is the difference between Qualifying Activities and Excluded Activities?

Qualifying Activities are listed in Cabinet Decision No. 55 of 2023 and generate income taxable at 0% when derived from eligible persons. Excluded Activities — such as transactions with UAE mainland persons involving certain goods or services — generate Non-Qualifying Income taxable at 9%.

Can a Free Zone company also elect Small Business Relief?

A QFZP cannot elect Small Business Relief, as they are already benefiting from the 0% QFZP rate. However, Free Zone entities that do not qualify as QFZP may be eligible for SBR if their revenue does not exceed AED 3 million.

Contact Us for Free Zone Corporate Tax Eligibility UAE

📞 Phone / WhatsApp: +971 50 794 8028
📞 Direct: +971 065 289 414
🌐 Office: Sharjah, Al Qasimia, Omran Tower, Office 302

Abdelhamid & Co. Certified Public Accountants & Auditors L L C SP — Licensed by the UAE Ministry of Economy (LC0106-01) | Licensed FTA Tax Agent (TAN: 30003958)

Our Services Corporate Tax Services