The UAE's 9% Corporate Tax preserves a 0% rate for a Qualifying Free Zone Person — but only on qualifying income, only if you meet substance requirements, stay within de-minimis limits, and prepare transfer-pricing documentation. One disqualifying transaction can tip your entire profit to 9%. Next Tax Source assesses your QFZP status honestly, structures your income to protect the 0% where it genuinely applies, and prepares your Corporate Tax registration and return for an FTA-registered tax agent to sign before it reaches the Federal Tax Authority.
What We Handle
- Qualifying Free Zone Person assessment — qualifying vs. excluded activities, and the de-minimis test
- Corporate Tax registration with the FTA and the annual return prepared to sign-off standard
- Economic-substance review so your 0% claim survives scrutiny
- Transfer-pricing documentation — master file, local file and the disclosure form where thresholds apply
- Mainland-versus-free-zone structuring when you deal with both, kept clean and defensible
Who This Is For
Free-zone companies were once a simple proposition: incorporate, trade, pay no tax. Corporate Tax has made the picture more nuanced. The 0% rate is still available, but it now has to be earned and documented. The companies that most need a careful Qualifying Free Zone Person assessment tend to be:
- Trading and distribution companies in DMCC, JAFZA, IFZA, RAKEZ and similar, moving goods through or around the UAE.
- Holding and IP companies using a free-zone vehicle to hold shares, real estate or intellectual property.
- Professional-services and consultancy firms, where the qualifying-versus-excluded-activity line is genuinely fine.
- Companies dealing with mainland UAE customers, whose revenue may fall outside qualifying income and into the 9% net.
- Groups with related-party transactions that trigger transfer-pricing obligations they did not previously have.
How The Qualifying Free Zone Person Test Works
Under Federal Decree-Law No. 47 of 2022 and the Cabinet and Ministerial Decisions that sit beneath it, a free-zone company only accesses the 0% rate if it is a Qualifying Free Zone Person. That status is not a box you tick on incorporation — it is a set of conditions you must meet and maintain, and failing any one of them is consequential.
- Qualifying income. Only certain income — broadly, dealings with other free-zone persons and defined qualifying activities — benefits from 0%. Income from excluded activities, and much mainland-sourced income, does not.
- Adequate substance. The company must conduct its core income-generating activities in the free zone, with adequate people, premises and assets. A letterbox presence will not survive scrutiny.
- The de-minimis test. Non-qualifying revenue must stay within a small permitted limit. Breach it, and you can lose Qualifying Free Zone Person status — not just on that income, but on everything.
- Transfer pricing. The company must comply with the arm's-length principle and maintain transfer-pricing documentation where the thresholds apply.
- Audited financial statements. A Qualifying Free Zone Person must prepare and maintain audited financial statements.
The consequence of failing is severe: losing the qualifying status generally means the standard 9% rate applies to all taxable income, and the disqualification can persist for several years. Because the detailed lists of qualifying and excluded activities, and the de-minimis figures, are set by Ministerial Decision and can be updated, we confirm the current position against official FTA and Ministry of Finance guidance before forming a view on your status.
Common Mistakes We Are Asked To Fix
The errors we see most often around free-zone Corporate Tax are the kind that feel harmless until the return is prepared — and by then the year is closed.
- Treating 0% as automatic because the company sits in a free zone, without ever testing whether the income qualifies.
- Taking on mainland business that quietly pushes non-qualifying revenue past the de-minimis limit and forfeits the whole 0%.
- No substance — running the company from elsewhere while claiming the free zone as its base.
- Skipping registration in the belief that a 0% rate means there is nothing to file.
- No transfer-pricing documentation for related-party dealings that clearly require it.
How Next Tax Source Handles It
We pair an always-on team of specialist AI agents with licensed human review. The agents map your revenue streams against the qualifying-activity rules, test your position against the de-minimis and substance requirements, keep your books to an audit-ready, IFRS-aligned standard, and assemble your Corporate Tax registration and return with full workpapers. An FTA-registered tax agent then reviews and signs before anything reaches the authority. We will tell you honestly when the 0% genuinely applies — and just as honestly when it does not — rather than filing a claim that cannot be defended.
Where you operate across both free zone and mainland, we structure and document the split so it is clean and defensible. And if you have UK or US interests as well, our cross-border specialists coordinate the full picture. For broader UAE accounting and VAT, see our Dubai accounting service.
What To Prepare
A first consultation is more productive with a few details, though we are comfortable starting from wherever your records are today.
- Your free-zone name, trade licence and licensed activities
- Your financial year-end and any Corporate Tax registration already issued
- A breakdown of your revenue by customer type — free-zone, mainland, overseas
- Details of your people, premises and where the work is actually done
- Any related-party transactions and your wider group structure
You can also model an indicative position first with our UAE calculators.
Questions People Ask
Do free zone companies pay 0% corporate tax?
Only Qualifying Free Zone Persons pay 0%, and only on qualifying income. Non-qualifying income — and a failure to meet substance or de-minimis rules — is taxed at 9%. The status must be earned and documented, not assumed.
What counts as qualifying income for a free zone company?
Broadly, income from transactions with other free-zone persons and certain qualifying activities, excluding most mainland UAE-sourced and 'excluded' activity income. We map your revenue streams against the FTA's qualifying-activity list.
Do I still need to register if I expect to pay 0%?
Yes. Corporate Tax registration with the FTA is mandatory for free-zone companies regardless of the rate you ultimately pay, and returns must still be filed.
Is transfer-pricing documentation required for free zone companies?
If you transact with related parties and meet the thresholds, yes — and a QFZP must maintain audited financial statements and TP documentation. We prepare both.
What is the de-minimis test and why does it matter?
The de-minimis rule limits how much non-qualifying revenue a Qualifying Free Zone Person can earn before losing its status. Exceed the permitted limit and the 0% rate can fall away across all of your income, not just the non-qualifying part. Because the figures are set by Ministerial Decision and can change, we confirm the current limit and monitor your revenue mix against it.
Will dealing with mainland customers cost me the 0% rate?
It can. Much mainland-sourced income is non-qualifying, and if it pushes you past the de-minimis limit you may lose Qualifying Free Zone Person status entirely. We assess your customer mix before it becomes a problem and structure mainland dealings so they are clean and defensible.
What happens if I lose my Qualifying Free Zone Person status?
If you fail the conditions, the standard 9% Corporate Tax rate generally applies to your taxable income, and the disqualification can last for several years rather than a single period. This is exactly why the status needs to be assessed and documented up front rather than assumed.
Every Filing, Signed By A Professional
We prepare it all to a ready-to-sign standard; an FTA-registered tax agent reviews and signs before anything is filed. Tell us your situation and we'll return a scoped proposal within one business day.
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