What is a Qualifying Free Zone Person?

A Qualifying Free Zone Person is a UAE free zone entity that meets every condition set by the Corporate Tax legislation and can therefore apply a 0% rate to its qualifying income. It is a status tested every tax period, not a benefit conferred by holding a free zone licence.

The conditions

• Adequate substance in the free zone — core income-generating activities actually conducted there, with the people, premises and expenditure to match.
• Qualifying income as defined, principally from transactions with other free zone persons and from specified qualifying activities.
• De minimis — non-qualifying revenue kept within the prescribed limits, tested against both a percentage of total revenue and an absolute cap.
• Transfer pricing compliance, including documentation.
• Audited financial statements — a hard requirement.
• No election to be taxed at the standard rates.

The cliff edge

Failing a condition does not reduce the benefit proportionally. It generally costs QFZP status for that tax period and the following four — meaning 9% on all taxable income, not just on the offending portion. A single unplanned mainland contract taken late in the year can be expensive in a way unrelated to the size of that contract.

What it does not mean

It does not mean exemption. A QFZP is a taxable person: it registers, it files, and it pays 9% on any non-qualifying income above the threshold. A free zone licence on its own confers nothing — the status has to be earned and held.

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.