Insights Corporate Tax
Corporate Tax Free Zone UAE: How a QFZP Keeps 0%
How a qualifying free zone person keeps the 0% corporate tax rate — Article 18 conditions, qualifying income, the de minimis test and substance.
Key takeaways
- QFZP status delivers 0% on qualifying income and 9% on everything else, not a blanket exemption
- Article 18(1) sets five conditions including adequate substance and compliance with Articles 34 and 55
- Ministerial Decision No. 229 of 2025 repealed MD 265/2023 and lists 14 qualifying and 6 excluded activities
- The de minimis limit is 5% of total revenue or AED 5,000,000, whichever is lower
- Every QFZP needs audited financial statements, with no revenue threshold, under MD 84/2025 Art 2(1)(b)
- Failing a condition removes the status from the start of the period and for the following four tax periods, under MD 229/2025 Art 5(2)
A qualifying free zone person pays 0% UAE corporate tax on qualifying income and 9% on the rest. Article 18(1) of Federal Decree-Law No. 47 of 2022 sets five conditions, Ministerial Decision No. 229 of 2025 adds the de minimis and audit tests, and failing any one of them removes the status for that tax period and the following four.
The corporate tax free zone UAE story is the one most business owners get half-right. They know the headline — free zones can still access a 0% corporate tax rate — and they stop there, assuming the licence in the drawer carries the benefit on its own. It does not.
The 0% rate lives inside a specific status, and that status is a bundle of conditions that all have to hold at the same time, every tax period, or the whole thing collapses to the standard 9% rate. This guide walks through what a qualifying free zone person actually is, what income qualifies, where the de minimis cliff edge sits, why substance and audited accounts are load-bearing, and what it takes to lose a status you worked to earn.
What a Qualifying Free Zone Person really is
Article 3(2) of Federal Decree-Law No. 47 of 2022 sets the two rates: 0% on qualifying income, and 9% on taxable income that is not qualifying income under Article 18 and any Cabinet decision on it.
Article 18(1) then sets the five statutory conditions. Every row below was read against the English text of Federal Decree-Law No. 47 of 2022 as published by the UAE Ministry of Finance, on 4 August 2026.
| Art 18(1) | Condition |
|---|---|
| (a) | Maintains adequate substance in the UAE |
| (b) | Derives qualifying income as specified by Cabinet decision |
| (c) | Has not elected to be subject to corporate tax under Article 19 |
| (d) | Complies with Article 34 (arm’s length principle) and Article 55 (transfer pricing documentation) |
| (e) | Meets any other conditions prescribed by the Minister |
Article 5(1) of Ministerial Decision No. 229 of 2025 exercises paragraph (e) and adds two more.
| MD 229/2025 Art 5(1) | Condition |
|---|---|
| (a) | Non-qualifying revenue does not exceed the de minimis requirements in Article 3 |
| (b) | It prepares audited financial statements in accordance with Ministerial Decision No. 84 of 2025 |
Article 18(4) adds a duration point that is often missed. The 0% rate applies for the remainder of the tax incentive period stipulated in the applicable legislation of the free zone in which the person is registered, extendable in accordance with Cabinet conditions, but any one period shall not exceed 50 years.
5% or AED 5,000,000
The de minimis ceiling on non-qualifying revenue under Article 3 of Ministerial Decision No. 229 of 2025 — whichever of the two is lower
Qualifying income under Cabinet Decision No. 100 of 2023
Cabinet Decision No. 100 of 2023 replaced Cabinet Decision No. 55 of 2023 with effect from 1 June 2023. Article 3(1) sets out four categories of qualifying income, subject to three carve-outs.
| CD 100/2023 Art 3(1) | Category |
|---|---|
| (a) | Income from transactions with a free zone person, except income from excluded activities |
| (b) | Income from transactions with a non-free zone person, but only for qualifying activities that are not excluded activities |
| (c) | Income from the ownership or exploitation of qualifying intellectual property under Article 7(1) |
| (d) | Any other income, provided the de minimis requirements in Article 4 are satisfied |
None of that qualifies where the income is attributable to a domestic or foreign permanent establishment under Article 5, derived from immovable property under Article 6, or treated as taxable income under Article 7(2).
Article 3(2) adds a condition to paragraph (a) that catches trading structures. Income counts as derived from a transaction with a free zone person only where that free zone person is the beneficial recipient. Article 3(3) defines that as a person with the right to use and enjoy the service or good, who has no contractual or legal obligation to supply it onward.
Article 3(4) is the sharpest provision in the decision. In deciding whether a QFZP has a domestic permanent establishment, Article 14 of the Corporate Tax Law applies, reading “Qualifying Free Zone Person” for “Non-Resident Person” and “geographical areas outside the Free Zones in the State” for “State”. In effect, a free zone company can create a permanent establishment on the UAE mainland by the same tests we set out in our guide to permanent establishment under UAE corporate tax.
Qualifying activities: the list that decides the rate
Ministerial Decision No. 229 of 2025 repealed Ministerial Decision No. 265 of 2023 and came into effect on 1 June 2023. Article 2(1) lists fourteen qualifying activities.
| MD 229/2025 Art 2(1) | Qualifying activity |
|---|---|
| (a) | Manufacturing of goods or materials |
| (b) | Processing of goods or materials |
| (c) | Trading of qualifying commodities |
| (d) | Holding of shares and other securities for investment purposes |
| (e) | Ownership, management and operation of ships |
| (f) | Reinsurance services |
| (g) | Fund management services |
| (h) | Wealth and investment management services |
| (i) | Headquarter services to related parties |
| (j) | Treasury and financing services to related parties or for its own account |
| (k) | Financing and leasing of aircraft |
| (l) | Distribution of goods or materials in or from a Designated Zone |
| (m) | Logistics services |
| (n) | Activities ancillary to paragraphs (a) to (m) |
Article 2(3)(d) adds a holding period that catches passive investment structures: shares and other securities are deemed held for investment purposes only when held for an uninterrupted period of at least 12 months.
Article 2(3)(c) adds a revenue test to commodity trading. Trading of qualifying commodities does not qualify where the QFZP’s revenue from distribution, warehousing, logistics or inventory management functions is 51% or more of its revenue for the tax period.
Excluded activities
Article 2(2) lists six excluded activities, and the exclusions carry their own carve-outs.
| MD 229/2025 Art 2(2) | Excluded activity | Carve-out |
|---|---|---|
| (a) | Any transactions with natural persons | Except transactions relating to ships, fund management, wealth and investment management, and aircraft financing and leasing |
| (b) | Banking activities | None |
| (c) | Insurance activities | Without prejudice to reinsurance services and headquarter services |
| (d) | Finance and leasing activities | Without prejudice to qualifying commodities, ships, treasury and financing, and aircraft financing and leasing |
| (e) | Ownership or exploitation of immovable property | Other than commercial property located in a free zone where the transaction is with a free zone person |
| (f) | Activities ancillary to (a) to (e) | None |
Paragraph (a) is the one that quietly reclassifies whole business models. A free zone consultancy selling to UAE individuals is transacting with natural persons, and unless the activity falls in one of the four named exceptions, that revenue is non-qualifying — which then feeds straight into the de minimis calculation.
The de minimis cliff edge
Article 4(1) of Cabinet Decision No. 100 of 2023 leaves the percentage and the cap to the Minister. Article 3 of Ministerial Decision No. 229 of 2025 supplies both.
The de minimis requirements shall be considered satisfied where the non-qualifying Revenue derived by the Qualifying Free Zone Person in a Tax Period does not exceed 5% of the total Revenue of the Qualifying Free Zone Person in that Tax Period or AED 5,000,000, whichever is lower.
Article 4(2)(a) of Cabinet Decision No. 100 of 2023 defines non-qualifying revenue as revenue derived in a tax period from three sources.
| CD 100/2023 Art 4(2)(a) | Non-qualifying revenue |
|---|---|
| 1 | Excluded activities |
| 2 | Activities that are not qualifying activities where the other party is a non-free zone person |
| 3 | Transactions with a free zone person that is not the beneficial recipient of the services or goods |
Article 4(3) then removes three items from both sides of the calculation: revenue from transactions with a non-free zone person in respect of commercial property in a free zone, and any-person transactions in respect of non-commercial property; revenue attributable to a domestic or foreign permanent establishment; and revenue from intellectual property other than qualifying IP income under Article 7(1).
A worked example in AED
Arclight Components FZE manufactures electronic assemblies in a UAE free zone. Its tax period is the calendar year 2026 and its revenue breaks down as follows.
| Revenue stream | Counterparty | Amount (AED) | Classification |
|---|---|---|---|
| Manufacturing of goods (Art 2(1)(a)) | Non-free zone businesses | 46,000,000 | Qualifying |
| Manufacturing of goods | Free zone persons, beneficial recipients | 11,500,000 | Qualifying |
| Repair services sold to individuals | Natural persons | 1,900,000 | Non-qualifying (Art 2(2)(a)) |
| Sublet of non-commercial property in the zone | Various | 700,000 | Excluded from both sides (Art 4(3)(a)) |
| Total revenue for the de minimis test | 59,400,000 |
Non-qualifying revenue is AED 1,900,000. The two limbs of the test run as follows.
| Limb | Calculation | Ceiling |
|---|---|---|
| 5% of total revenue | 5% × 59,400,000 | AED 2,970,000 |
| Fixed cap | — | AED 5,000,000 |
| Applicable ceiling (lower) | AED 2,970,000 |
At AED 1,900,000, Arclight is inside the ceiling. Its qualifying income is taxed at 0% under Article 3(2)(a), and the AED 1,900,000 of non-qualifying income is taxed at 9% under Article 3(2)(b) — roughly AED 171,000 before deductions.
Now change one fact. A single AED 1,200,000 contract with UAE individuals is signed in December 2026, pushing non-qualifying revenue to AED 3,100,000. That exceeds the AED 2,970,000 ceiling by AED 130,000.
Article 5(2) of Ministerial Decision No. 229 of 2025 now removes QFZP status from the beginning of 2026 and for the subsequent four tax periods. The whole AED 57,500,000 of previously qualifying income moves to 9%, less the AED 375,000 band — roughly AED 5,142,000 of corporate tax for 2026 alone, and the same treatment through 2030. A AED 130,000 overshoot has cost the company its rate for five years.
The de minimis test is the only rule in the UAE corporate tax regime where a AED 130,000 miscalculation can cost five years of a 0% rate. It is also the easiest one to monitor, because it needs nothing more than a revenue classification field in the ledger and a monthly report.
Substance and audited accounts: the load-bearing conditions
Article 8 of Cabinet Decision No. 100 of 2023 defines what “adequate substance” means, and it is more specific than most free zone companies expect.
| CD 100/2023 Art 8 | Requirement |
|---|---|
| 8(1) | Undertake core income-generating activities in a free zone or Designated Zone, as required for the activity |
| 8(1) | Have adequate assets, an adequate number of qualified full-time employees, and incur adequate operating expenditure, for each activity, having regard to the level of activity |
| 8(2) | Core activities may be outsourced within a free zone or Designated Zone, provided the QFZP has adequate supervision |
| 8(3) | Core activities for qualifying IP may be outsourced to any person in the UAE, and to any non-related person outside it, with adequate supervision |
| 8(4) | Core income-generating activities are the significant functions that drive business value, not exclusively or mostly support activities |
Article 8(4) is the sentence that decides substance disputes. A free zone entity whose UAE presence is limited to administration, invoicing and bookkeeping is running support activities. The significant functions that drive value sit elsewhere, and the substance condition in Article 18(1)(a) is not met.
On the audit side, the position is unambiguous. Article 2(1)(b) of Ministerial Decision No. 84 of 2025 requires every qualifying free zone person to prepare and maintain audited financial statements, with no revenue threshold at all — unlike Article 2(1)(a), which applies the AED 50,000,000 test only to a taxable person that is not a tax group. Article 5(1)(b) of Ministerial Decision No. 229 of 2025 then makes it an express QFZP condition.
The new distribution reporting requirement
FTA Decision No. 6 of 2026, issued 2 June 2026 and effective for tax periods starting on or after 1 January 2026, adds a reporting layer for one qualifying activity only: distribution of goods or materials in or from a Designated Zone under Article 2(1)(l) of Ministerial Decision No. 229 of 2025.
| FTA Dec 6/2026 | Requirement |
|---|---|
| Art 2(1) | Obtain an agreed-upon procedures report from the independent external auditor who audits the financial statements, or another auditor licensed in the UAE |
| Art 2(2) | The report must follow ISRS 4400, Agreed-Upon Procedures Engagements, as issued by the IAASB |
| Art 2(3)(a) | It must demonstrate that the QFZP supplies goods or materials to customers that resell, process or alter them for sale or resale |
| Art 2(3)(b) | It must demonstrate that goods entering the UAE, if imported by the QFZP, are imported through a Designated Zone |
| Art 2(4) | Retain documentation on customer reseller status — licences, signed declarations, sales agreements, invoices, purchase orders |
| Art 2(5) | Retain import declarations, customs clearance documents, bills of lading or airway bills evidencing entry through a Designated Zone |
| Art 2(7) | Submit the report to the FTA no later than 30 days after the corporate tax return deadline |
For a December year end, that puts the report deadline at roughly 30 October following the year end, thirty days after the 30 September return date in Article 53(1). The evidence it rests on — customer reseller declarations in particular — has to be collected transaction by transaction across the year, not assembled in October.
Transfer pricing does not stop at the zone boundary
Article 18(1)(d) makes compliance with Articles 34 and 55 a condition of the status itself, not merely a parallel obligation. That framing matters: a transfer pricing failure is not just an adjustment, it is a route to losing the 0% rate for five periods under Article 5(2) of Ministerial Decision No. 229 of 2025.
Article 34 imposes the arm’s length standard on transactions and arrangements between related parties. Article 55(1) lets the FTA require a disclosure filed with the return. Article 55(2) requires a master file and local file where the Minister’s conditions are met. Article 55(3) and Article 55(4) both give a 30-day turnaround on FTA requests.
Article 3(4) of Cabinet Decision No. 100 of 2023 compounds the exposure. Where a QFZP has a domestic permanent establishment on the UAE mainland, Article 5(2) of that decision requires the attributable income to be calculated as if the establishment were a separate and independent person that is a related party of the QFZP. Free zone groups with mainland operations are therefore doing transfer pricing on themselves.
How QFZP status is actually lost
| Trigger | Consequence | Source |
|---|---|---|
| Failing any Article 18(1) condition at any time in the period | Ceases to be a QFZP from the beginning of that tax period | FDL 47/2022 Art 18(2) |
| Failing any Article 18(1) or MD 229/2025 condition | Ceases from the beginning of the period and for the subsequent 4 tax periods | MD 229/2025 Art 5(2) |
| Electing standard rates under Article 19 | Effective from the current or the following tax period, at the person’s choice | FDL 47/2022 Art 19(2) |
| Exceeding the de minimis ceiling | Treated as a condition failure under MD 229/2025 Art 5(1)(a) | MD 229/2025 Arts 3 and 5 |
| No audited financial statements | Treated as a condition failure under MD 229/2025 Art 5(1)(b) | MD 84/2025 Art 2(1)(b) |
| Joining a corporate tax group | Not possible — Article 40(1)(f) bars a QFZP | FDL 47/2022 Art 40(1)(f) |
Article 18(3) preserves the Minister’s power to prescribe conditions or circumstances under which a person may continue to be a QFZP, or cease from a different date. Do not plan around it. Plan around Article 5(2).
Note also what QFZP status forecloses. Because Article 40(1)(f) bars a qualifying free zone person from a tax group, a free zone entity cannot pool results with mainland siblings — the mechanics are set out in our guide to UAE corporate tax groups. Article 38(1)(f) applies the same bar to transferring tax losses.
One incentive does remain open to a free zone company, but only on terms that cut against the 0% rate. Article 3(2) of Cabinet Decision No. 215 of 2025 lets a QFZP claim the R&D tax credit only where it is subject to corporate tax at 9% on taxable income derived from the R&D activities, or subject to top-up tax. In other words, the credit is available on income you are already paying 9% on. The trade-off is set out in our guide to the investment tax allowance in the UAE.
Keeping the 0% rate: a working discipline
| Cadence | Action | Source |
|---|---|---|
| Before the tax period starts | Map every revenue stream to Article 2(1) or 2(2) of MD 229/2025 | MD 229/2025 Art 2 |
| Monthly | Report non-qualifying revenue against both the 5% and AED 5,000,000 limbs | MD 229/2025 Art 3 |
| Monthly | Confirm free zone counterparties are the beneficial recipient | CD 100/2023 Arts 3(2) and 3(3) |
| Quarterly | Review substance — headcount, premises, operating expenditure by activity | CD 100/2023 Art 8(1) |
| Quarterly | Test for a domestic permanent establishment on the mainland | CD 100/2023 Art 3(4) |
| Annually | Commission the audit as routine, not as a scramble | MD 84/2025 Art 2(1)(b) |
| Annually | Prepare the transfer pricing disclosure, master file and local file | FDL 47/2022 Art 55 |
| Within 9 months of period end | File the corporate tax return and settle the tax | FDL 47/2022 Art 53(1) |
| Within 30 days of that deadline | Submit the agreed-upon procedures report, if distributing from a Designated Zone | FTA Dec 6/2026 Art 2(7) |
| For 7 years | Retain the records supporting all of the above | FDL 47/2022 Art 56(1) |
The one control that does most of the work is a revenue classification field applied at invoice level. Without it, the de minimis position is reconstructed in month twelve from a sales ledger that was never designed to answer the question, and a AED 130,000 overshoot is discovered after it has already cost five years.
Where this leaves your free zone company
The 0% rate is real, durable and worth protecting. It is also conditional in a way a free zone licence is not. Article 18(1) sets five conditions, Ministerial Decision No. 229 of 2025 adds two, Cabinet Decision No. 100 of 2023 defines what income qualifies and what substance means, and Article 5(2) of the Ministerial Decision applies a five-period penalty for failure.
The companies that keep the rate treat it as a live status with a monthly report behind it. The ones that lose it treated it as a fact about their licence. If you cannot answer, today, what percentage of your revenue is non-qualifying and which limb of the de minimis test governs your business, that is the gap worth closing before the tax period ends.
Velmont Crest is a DED-licensed UAE accounting firm providing advisory and preparation support on qualifying free zone person status, revenue classification, substance documentation, transfer pricing files and FTA filings for free zone companies across the Emirates. Read more on our insights hub, see our corporate tax services, or get in touch via our contact page.
Disclaimer: Velmont Crest is a DED-licensed accounting firm providing advisory, preparation and compliance support services. We are not a law firm, the Federal Tax Authority, or an FTA-registered tax agent representing clients before the FTA. UAE Corporate Tax free zone rules are set and updated by the Ministry of Finance, the Cabinet and the Federal Tax Authority — verify your specific position against current legislation and FTA guidance, and take professional advice tailored to your circumstances before acting.
References
- Federal Decree-Law No. 47 of 2022 on the Taxation of Corporations and Businesses — UAE Ministry of Finance
- Cabinet Decision No. 100 of 2023 on Determining Qualifying Income for the Qualifying Free Zone Person — Federal Tax Authority
- Ministerial Decision No. 229 of 2025 on Qualifying Activities and Excluded Activities — Federal Tax Authority
- Ministerial Decision No. 84 of 2025 on Audited Financial Statements — Federal Tax Authority
- FTA Decision No. 6 of 2026 on Additional Procedures for QFZP Compliance — Federal Tax Authority
- The Official Portal of the UAE Government — Corporate Tax
Frequently asked questions
- Does a free zone licence automatically give 0% corporate tax in the UAE?
- No. Article 18(1) of Federal Decree-Law No. 47 of 2022 makes a qualifying free zone person one that maintains adequate substance in the UAE, derives qualifying income as specified by Cabinet decision, has not elected standard rates under Article 19, complies with Articles 34 and 55 on transfer pricing, and meets any other conditions the Minister prescribes. Article 5(1) of Ministerial Decision No. 229 of 2025 adds two more: the de minimis test, and audited financial statements under Ministerial Decision No. 84 of 2025.
- What is a free zone in the UAE?
- A free zone is a designated economic area with its own licensing authority, company rules and investor incentives — full foreign ownership, simplified setup and customs advantages being the usual draws. Dozens operate across the seven emirates, from Dubai and Sharjah to Abu Dhabi, Ajman and Ras Al Khaimah. For corporate tax the important point is that being inside a free zone is a licensing fact, not a tax status. The 0% rate belongs to the Article 18 conditions, and a free zone company failing them is taxed at 9% like any mainland business.
- What counts as qualifying income for a QFZP?
- Article 3(1) of Cabinet Decision No. 100 of 2023 sets four categories: income from transactions with a free zone person, except from excluded activities; income from transactions with a non-free zone person, but only for qualifying activities that are not excluded activities; income from qualifying intellectual property under Article 7(1); and any other income where the de minimis requirements are satisfied. None of it qualifies if it is attributable to a permanent establishment under Article 5 or derived from immovable property under Article 6.
- What is the de minimis rule and why does it matter so much?
- Article 3 of Ministerial Decision No. 229 of 2025 satisfies the de minimis requirements where non-qualifying revenue does not exceed 5% of total revenue in the tax period, or AED 5,000,000, whichever is lower. The danger is the cliff edge. Crossing it does not simply tax the excess at 9%. Article 5(2) of the same decision removes qualifying free zone person status from the beginning of the relevant tax period and for the subsequent four tax periods, so all income moves to 9% for five years.
- What is non-qualifying revenue for the de minimis test?
- Article 4(2)(a) of Cabinet Decision No. 100 of 2023 defines it as revenue from excluded activities; revenue from activities that are not qualifying activities where the other party is a non-free zone person; and revenue from transactions with a free zone person that is not the beneficial recipient of the goods or services. Article 4(3) then excludes certain revenue from both sides of the calculation, including revenue attributable to a domestic or foreign permanent establishment.
- Which activities are qualifying activities for a QFZP?
- Article 2(1) of Ministerial Decision No. 229 of 2025 lists fourteen: manufacturing of goods or materials; processing of goods or materials; trading of qualifying commodities; holding of shares and other securities for investment purposes; ownership, management and operation of ships; reinsurance services; fund management services; wealth and investment management services; headquarter services to related parties; treasury and financing services to related parties or for its own account; financing and leasing of aircraft; distribution of goods or materials in or from a Designated Zone; logistics services; and activities ancillary to those.
- Which activities are excluded activities?
- Article 2(2) of Ministerial Decision No. 229 of 2025 lists six: any transactions with natural persons, except in relation to ships, fund management, wealth and investment management, and aircraft financing and leasing; banking activities; insurance activities, without prejudice to reinsurance and headquarter services; finance and leasing activities, without prejudice to qualifying commodities, ships, treasury and aircraft; ownership or exploitation of immovable property other than commercial property in a free zone transacted with a free zone person; and activities ancillary to those.
- Are audited financial statements really mandatory to keep QFZP status?
- Yes, and there is no revenue threshold. Article 2(1)(b) of Ministerial Decision No. 84 of 2025 requires every qualifying free zone person to prepare and maintain audited financial statements, in contrast to Article 2(1)(a), which applies its AED 50,000,000 revenue test only to a taxable person that is not a tax group. Article 5(1)(b) of Ministerial Decision No. 229 of 2025 then makes preparing those statements an express condition of QFZP status.
- Does transfer pricing apply to free zone companies claiming 0%?
- In full. Article 18(1)(d) of Federal Decree-Law No. 47 of 2022 makes compliance with Articles 34 and 55 a condition of qualifying free zone person status. Article 34 imposes the arm's length standard on related-party transactions and Article 55 governs the disclosure, master file and local file. Article 55(3) and 55(4) give the FTA a 30-day turnaround on requests. Artificially shifting profit into a 0% entity is precisely what these provisions exist to prevent.
- How long does a company lose QFZP status for after a breach?
- Article 18(2) of Federal Decree-Law No. 47 of 2022 makes a person that fails any Article 18(1) condition at any particular time during a tax period cease to be a qualifying free zone person from the beginning of that tax period. Article 5(2) of Ministerial Decision No. 229 of 2025 extends that: the person ceases to be a QFZP from the beginning of the relevant tax period and for the subsequent four tax periods. Article 18(3) reserves the Minister's power to prescribe conditions for continuing or ceasing from a different date.
- What extra procedures apply to distribution from a Designated Zone?
- FTA Decision No. 6 of 2026, issued 2 June 2026 and effective for tax periods starting on or after 1 January 2026, adds them. Article 2(1) requires a QFZP engaged in distribution of goods or materials in or from a Designated Zone to obtain an agreed-upon procedures report from an independent external auditor. Article 2(2) requires it to follow ISRS 4400. Article 2(7) requires submission to the FTA no later than 30 days after the corporate tax return deadline.
- What must the agreed-upon procedures report demonstrate?
- Article 2(3) of FTA Decision No. 6 of 2026 sets two findings. First, that the qualifying free zone person supplies goods or materials to customers that resell them, or parts of them, or process or alter them for sale or resale. Second, that goods or materials entering the UAE, if imported by the QFZP, are imported through a Designated Zone. Article 2(4) and 2(5) list the supporting documentation, including customer licences, signed reseller declarations, sales agreements, import declarations and bills of lading.
- Can a QFZP be part of a corporate tax group?
- No. Article 40(1)(f) of Federal Decree-Law No. 47 of 2022 requires that neither the parent company nor the subsidiary is a qualifying free zone person. Article 38(1)(f) applies the same bar to transferring tax losses between related persons. The two regimes are mutually exclusive by design, because grouping would let 0% qualifying income and 9% mainland income be consolidated into a single computation.
- How much substance does a QFZP actually need?
- Article 8(1) of Cabinet Decision No. 100 of 2023 requires the QFZP to undertake its core income-generating activities in a free zone or Designated Zone, and, having regard to the level of activity, to have adequate assets, an adequate number of qualified full-time employees there, and to incur an adequate amount of operating expenditure for each activity. Article 8(2) permits outsourcing within a free zone or Designated Zone provided the QFZP has adequate supervision of the outsourced activity.
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