Qualifying Free Zone Person: the 0% Free Zone Rate

The conditions

• Maintain adequate substance in the free zone: assets, staff and operating expenses in line with the activity.
• Derive qualifying income.
• Not elect to be subject to the standard 9% regime.
• Meet the de minimis requirement: non-qualifying revenue no more than 5% of total revenue or AED 5 million, whichever is lower.
• Comply with the transfer pricing rules and keep transfer pricing documentation.
• Prepare audited financial statements.

Source: Federal Tax Authority: Basic tax information bulletin, Free Zone Person; Federal Tax Authority: Free Zone Persons corporate tax guide^2,3

Qualifying and excluded activities

Ministerial Decision No. 229 of 2025 lists the activities that can earn qualifying income. They include manufacturing and processing of goods, trading of qualifying commodities, holding shares and securities, owning and operating ships, reinsurance, fund and wealth management, headquarters and treasury services to related parties, aircraft financing and leasing, distribution in or from a designated zone, and logistics. Excluded activities include most transactions with individuals (natural persons), banking, insurance and most property income.⁴

Selling to mainland customers or to consumers can push a free zone company over the de minimis limit. Check the activity list for your licence with a tax adviser before relying on 0%.

If a condition is missed

A company that fails a condition stops being a QFZP from the start of that tax period and is taxed at the standard rates for that period and the following four.³