Key Takeaways
- The 0% rate applies only to qualifying income of a Qualifying Free Zone Person
- Substance, de minimis, and audited accounts conditions all apply
- Non-qualifying income beyond the de minimis limit can lose the benefit
The headline attraction of a Dubai free zone is the potential 0% corporate tax rate. But it is conditional, not automatic — understanding the Qualifying Free Zone Person rules is essential to keep the benefit and avoid an unexpected 9% charge.
Qualifying Free Zone Person conditions
To be a QFZP, a Dubai free zone company must maintain adequate substance in the UAE, derive qualifying income, comply with transfer pricing rules, and prepare audited financial statements. Fail any core condition and the company is taxed at the standard 9% on all its profits.
Qualifying vs non-qualifying income
Only qualifying income benefits from 0%. Income from certain excluded activities or from mainland customers may be non-qualifying. The de minimis rule allows a limited amount of non-qualifying revenue, but exceeding it jeopardises QFZP status entirely — which is why accurate income tagging is critical.
Staying qualified
Keep audited accounts, document substance (staff, premises, activities), and monitor non-qualifying revenue against the de minimis threshold throughout the year. A tax consultant can structure activities and contracts so the QFZP position holds up under FTA scrutiny.
