Free Zone Tax Regimes Under UAE Corporate Tax — What Qualifying Income Really Means
With the UAE Corporate Tax law now fully in force, free zone entities face a critical question: does your income actually qualify for the 0% rate? We break down the substance requirements, income tests, and common pitfalls.
Why this matters now
The Qualifying Free Zone Person (QFZP) regime offers significant tax benefits for eligible free zone businesses, including access to a 0% Corporate Tax rate on qualifying income. However, maintaining QFZP eligibility requires careful technical analysis, operational alignment, and ongoing monitoring of qualifying conditions.
Businesses that fail to satisfy substance requirements, de minimis thresholds, or qualifying activity conditions may face loss of QFZP status and broader tax exposure.
What counts as qualifying income?
QFZP assessments require detailed review of operational activities, revenue streams, intercompany transactions, and substance indicators across the business.
We support free zone entities in evaluating eligibility conditions, identifying potential risk areas, and implementing governance frameworks designed to support long-term QFZP compliance.
Qualifying activity assessment
We evaluate whether business activities fall within qualifying activity categories under applicable UAE Corporate Tax regulations.
Qualifying & non-qualifying income review
We assess revenue streams to determine treatment of qualifying income, excluded income, and non-qualifying income exposures.
Substance requirement analysis
We review operational substance indicators including employee presence, adequate assets, operating expenditure, core income-generating activities, and management oversight structures.
De minimis threshold review
We assess non-qualifying revenue exposure against applicable de minimis thresholds to evaluate ongoing QFZP eligibility.
Need help assessing your free zone position? Contact SBC LLC for QFZP advisory and compliance support.