Free Zone Corporate Tax: Are You Still Qualifying for the 0% Rate?
Free Zone companies can enjoy a 0% corporate tax rate — but only if they meet the FTA's Qualifying Free Zone Person (QFZP) criteria. Many businesses are unknowingly losing their exemption status.
UAE Free Zone companies can continue enjoying a 0% corporate tax rate, but only if they meet the Federal Tax Authority's Qualifying Free Zone Person (QFZP) criteria. Many businesses are unknowingly jeopardising their exempt status.
A Free Zone entity loses its 0% status if it: earns income from UAE mainland activities beyond permitted limits; fails to meet the "adequate substance" test; or makes the irrevocable election to opt out of QFZP treatment.
The QFZP election must be assessed in the first tax period — it cannot be made retrospectively. Once made, it is binding for that tax year.
Key FTA tests include: having sufficient employees, assets, and operating expenditure in the Free Zone; earning "qualifying income" as defined under Ministerial Decision No. 265 of 2023; and maintaining adequate books and records.
SAE assists Free Zone businesses across DIFC, DMCC, JAFZA, DAFZA, RAKEZ, and other zones with QFZP eligibility assessments and ongoing compliance.
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Our insights are written by ex-Big Four chartered accountants with deep UAE tax and accounting expertise. All content reflects current FTA regulations and legislation.
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