Qualifying Free Zone Person checker

A juridical free zone person that meets ALL of: (1) maintains adequate substance in the UAE, (2) derives Qualifying Income, (3) has not elected to be subject to standard CT, (4) complies with the arm's length principle + transfer pricing documentation, (5) prepares audited financial statements, and (6) meets the de-minimis test. QFZPs pay 0% CT on Qualifying Income and 9% on non-qualifying income.

Per Cabinet Decision 55 of 2023: income from transactions with other free zone persons (excluding income from Excluded Activities), income from Qualifying Activities (per Ministerial Decision 229/2025, which replaced Ministerial Decision 265/2023 — manufacturing, holding shares, distribution from a Designated Zone, headquarters services to related parties, etc.), ownership of qualifying intangible assets, and ancillary income within set thresholds.

A free zone person remains a QFZP only if non-qualifying revenue does NOT exceed the LOWER of: 5% of total revenue OR AED 5,000,000 (Article 3, Ministerial Decision No. 229 of 2025). Breach the de-minimis = lose QFZP status for that tax period AND the next four tax periods (Article 5(2) of the same decision). The penalty for breach is severe — five-year disqualification.

All 40+ UAE free zones qualify — DMCC, JAFZA, DIFC, ADGM, RAKEZ, IFZA, Meydan, SHAMS, DAFZA, Hamriyah, Sharjah Publishing City and others. Note: free zone status for CT differs from 'Designated Zone' status for VAT (Cabinet Decision 100/2024). A free zone person can be a QFZP even if its free zone isn't VAT-designated.

Cabinet Decision 55/2023 excludes: transactions with natural persons, banking activities, insurance activities, finance and leasing activities (except intra-group), ownership/exploitation of immovable property (except commercial property in a free zone to other free zone persons), ownership/exploitation of intellectual property (except per Qualifying Income rules). Income from excluded activities is NEVER qualifying.

Adequate substance means: core income-generating activities conducted IN the free zone, adequate assets, adequate qualified employees, adequate operating expenditure — all proportionate to the income earned. Holding companies have lighter substance tests. The FTA reviews substance against the income mix at audit.

Yes — Article 19(1) of FDL 47/2022 lets a qualifying free zone person elect to be taxed at the standard rates instead, and Article 19(2) sets when that election takes effect: either the start of the tax period in which it is made, or the start of the following one. This can be useful if your income mix breaches de-minimis or if you want simpler compliance. How long the election then binds you is not stated in Article 19 itself — check the FTA's Free Zone Persons corporate tax guide, and take advice, before you tick the box on EmaraTax.

It depends on QFZP status. A free zone company that qualifies as a Qualifying Free Zone Person pays 0% Corporate Tax on its Qualifying Income and 9% only on non-qualifying income. A free zone company that does not qualify — or elects out under Article 19 — is taxed like a mainland Resident Person: 0% on the first AED 375,000 of taxable income and 9% above that. Free zones do not give an automatic tax exemption; the 0% rate has to be earned by meeting all six QFZP conditions, including the de-minimis test.

The same rules apply across all UAE free zones — DMCC, DIFC, JAFZA, ADGM, RAKEZ, IFZA, Meydan, DAFZA and the rest. A company in any of these free zones pays 0% Corporate Tax on Qualifying Income if it is a Qualifying Free Zone Person, and 9% on non-qualifying income above AED 375,000. Your specific free zone does not change the rate — what matters is whether your income is Qualifying Income under Cabinet Decision 55/2023 and whether you stay within the de-minimis limit. DIFC and ADGM financial firms often earn regulated fund-management and wealth-management income, which can be Qualifying Income subject to the regulatory conditions.

A QFZP can earn non-qualifying income up to the de-minimis limit — the LOWER of 5% of total revenue OR AED 5,000,000. For an entity with AED 20,000,000 total revenue, 5% is AED 1,000,000, so the AED 5M cap does not bind and the limit is AED 1,000,000. For an entity with AED 200,000,000 revenue, 5% is AED 10,000,000, so the AED 5,000,000 cap binds instead. Exceed whichever figure is lower and QFZP status is lost for that tax period AND the next four — five years at the standard 9% rate. Use the checker above to see which threshold binds for your revenue and how much headroom remains.

It performs the de-minimis arithmetic (5% / AED 5M) correctly. It does NOT determine substance adequacy, Qualifying Income classification of specific transactions, transfer pricing compliance, or audited financial-statement requirements. A QFZP decision affects tax for five years — engage a tax advisor before relying on it. Velmont Crest is a UAE accounting and advisory firm; we prepare the revenue split, workpapers and CT computation and support your QFZP position alongside a registered tax agent.