The 0% rate is a set of conditions
Qualifying Free Zone Person status is not something your licence gives you. It is something you satisfy every period — and lose for five if you miss a condition.
The 0% Corporate Tax rate available to a Qualifying Free Zone Person is the most valuable — and most conditional — position in the UAE tax system. It is not a status you hold by virtue of your licence. It is a set of conditions you meet every period, and lose entirely if you fail one.
The QFZP conditions, in plain terms
- Adequate substance in the free zone — core income-generating activities actually conducted there, with the people, premises and expenditure to match. A licence and a mailbox is not substance.
- Qualifying income — income falling within the defined categories, principally from transactions with other free zone persons and specified qualifying activities.
- De minimis — non-qualifying revenue kept within the prescribed limits, tested by reference to both a percentage of total revenue and an absolute cap.
- Arm's length and documentation — compliance with transfer pricing requirements, including documentation.
- Audited financial statements — a hard requirement, not an optional extra. See audit support.
- No election to be taxed at standard rates — the status can be given up, and once given up it is given up for a period of years.
Failing the de minimis or substance conditions does not reduce the benefit proportionally. It generally costs QFZP status for that tax period and the following four tax periods — meaning 9% on all taxable income, not just the offending portion. That asymmetry is why free zone entities should be monitoring their revenue mix monthly rather than discovering the position at year end.
What we do for free zone entities
Monitor the revenue split against the de minimis limits during the year, rather than reporting a breach after it happens; maintain the accounting records and audited-statement readiness the status requires; document the substance position; handle transfer pricing for intra-group transactions; and model, honestly, whether QFZP status is worth the compliance for your business — for some entities it plainly is not, and knowing that early is worth a great deal.
We work across the major zones — including DMCC, JAFZA, DAFZA, Meydan, IFZA, RAKEZ, SHAMS, Dubai South and the financial free zones of DIFC and ADGM — each of which has its own filing, audit and renewal requirements on top of the federal position.
Reviewed 18 August 2026 by Ahmed Nabil Selim. UAE tax rates, thresholds and deadlines change — confirm the position for your period before relying on it.
Free zone accounting — frequently asked questions
They are within the Corporate Tax regime, but a Qualifying Free Zone Person applies 0% to qualifying income and 9% to non-qualifying income above the threshold. So the answer is that free zone entities are taxable persons who may pay nothing — provided they satisfy every QFZP condition, including audited financial statements, adequate substance, de minimis compliance and transfer pricing documentation. There is no automatic exemption attached to a free zone licence.
The entity generally ceases to be a Qualifying Free Zone Person for that tax period and for the following four tax periods, and is taxed at the standard rates on all its taxable income for those periods. The consequence is disproportionate to the breach, which is exactly why the revenue mix needs monitoring during the year. A single unplanned mainland contract taken in month ten can be expensive in a way that has nothing to do with the size of that contract.
Several free zones require audited financial statements as a condition of licence renewal, and separately, audited financial statements are a mandatory condition of QFZP status for Corporate Tax purposes. So a free zone entity relying on the 0% rate needs an audit regardless of what its particular zone requires for renewal. We prepare the statements and file and appoint an independent registered auditor — we do not perform the audit.
Want a straight answer on your position?
Tell us about the business — licence, size, systems and where things currently stand. We will tell you what you are obliged to do and what it costs to have it handled.
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