QFZP (Qualifying Free Zone Person) UAE - Definition & Guide

What is a QFZP?

A Qualifying Free Zone Person (QFZP) is a Free Zone entity that meets specific conditions to benefit from a 0% Corporate Tax rate on "Qualifying Income." This preferential treatment is designed to maintain the UAE's Free Zones as attractive business hubs while implementing Corporate Tax.

Corporate Tax Rates for Free Zone Entities

Qualifying Income

Income from qualifying activities with other Free Zone Persons or outside UAE

Non-Qualifying Income

Income from mainland UAE or excluded activities

QFZP Eligibility Conditions

To qualify as a QFZP, a Free Zone entity must meet ALL of the following conditions:

Maintain Adequate Substance: Have adequate assets, employees, and operating expenses for activities conducted

Derive Qualifying Income: Income must be from qualifying activities (see list below)

Not Elect Out: Not have elected to be subject to standard Corporate Tax rates

Comply with Transfer Pricing: Meet arm's length requirements for related party transactions

Maintain Audited Financials: Prepare audited financial statements in accordance with accepted standards

Qualifying Activities

Income from the following activities may qualify for 0% CT:

Manufacturing

Production of goods or materials in the Free Zone

Processing

Processing of goods or materials

Holding of Shares

Holding companies with qualifying shareholdings

Headquarters Services

Regional headquarter activities

Treasury & Financing

Group treasury and financing activities

Logistics

Warehousing, distribution, and logistics services

Fund Management

Investment fund management (regulated)

Reinsurance

Reinsurance activities (regulated)

Excluded Activities

The following activities are EXCLUDED from qualifying income regardless of conditions:

Transactions with mainland UAE (non-Free Zone) persons
Banking, insurance, and financial services (regulated)
Ownership or exploitation of immovable property (except commercial in Free Zone)
Intellectual property transactions with related parties

De Minimis Rules

A QFZP can have limited non-qualifying income without losing 0% status:

Non-qualifying revenue threshold: Up to 5% or AED 5 million (whichever is lower) of total revenue
Exceeding threshold: If exceeded, all income becomes taxable at 9%

QFZP (Qualifying Free Zone Person)