UAE Free Zones offer significant tax advantages for businesses. Understanding these benefits and qualification requirements is essential for maximizing your tax position.
What is a Qualifying Free Zone Person (QFZP)?
A Qualifying Free Zone Person is a Free Zone entity that meets specific conditions to benefit from a 0% Corporate Tax rate on qualifying income. This status provides significant tax savings compared to the standard 9% rate.
Key Tax Benefits
- 0% Corporate Tax on qualifying income
- 100% foreign ownership allowed
- 100% profit repatriation permitted
- No import/export duties within the Free Zone
- No personal income tax
QFZP Qualification Requirements
To qualify for the 0% Corporate Tax rate, Free Zone businesses must:
- Maintain adequate substance in the UAE
- Derive "qualifying income" as defined by the CT law
- Not elect to be subject to regular Corporate Tax
- Comply with transfer pricing rules
- Prepare audited financial statements
What is Qualifying Income?
Qualifying income generally includes:
- Income from transactions with other Free Zone Persons
- Income from certain qualifying activities (regulated activities, shipping, fund management)
- Income that is not attributable to a domestic Permanent Establishment
Non-qualifying income is subject to the standard 9% Corporate Tax rate.
Popular Free Zones
The UAE has over 45 Free Zones, including:
- DMCC - Dubai Multi Commodities Centre (trading, services)
- JAFZA - Jebel Ali Free Zone (logistics, manufacturing)
- DIFC - Dubai International Financial Centre (finance, fintech)
- ADGM - Abu Dhabi Global Market (finance, professional services)
- RAKEZ - Ras Al Khaimah Economic Zone (budget-friendly option)
- IFZA - International Free Zone Authority (consultants, freelancers)
Substance Requirements
Free Zone businesses must demonstrate adequate substance, which typically means:
- Having qualified employees in the UAE
- Incurring adequate operating expenditure
- Maintaining physical office premises
- Conducting core income-generating activities in the UAE
VAT Considerations
Free Zone businesses are still subject to UAE VAT at 5%, with some exceptions:
- Goods transferred between Designated Zones may be zero-rated
- Services to customers outside the UAE are zero-rated
- Intra-Free Zone transactions may qualify for special treatment
How TaxSey Supports Free Zone Businesses
TaxSey helps Free Zone businesses maintain compliance and maximize tax benefits:
- Track qualifying vs. non-qualifying income automatically
- Ensure transfer pricing compliance
- Generate QFZP documentation
- File VAT and Corporate Tax returns accurately
- Monitor substance requirements