QFZP assessment for UAE free zones
A documented, written assessment of whether your free-zone entity meets the Qualifying Free Zone Person conditions for Corporate Tax — qualifying income, substance, de minimis and audited accounts. A QFZP assessment is not an FTA approval or a guarantee of 0% status.
A free-zone licence does not, by itself, give you 0% Corporate Tax
The 0% QFZP rate applies only to qualifying income, and only if the entity meets every QFZP condition for the full tax period. Non-qualifying income is taxable at the standard rate. Breaching any single condition can cause the entity to be taxed at 9% on all income, usually for the current period and the following four periods. The assessment helps you evidence the position taken.
QFZP eligibility conditions
1. Adequate substance in a UAE free zone
The entity must undertake its core income-generating activities in a free zone, with adequate assets, qualified employees and operating expenditure — not merely hold a licence.
2. Qualifying income only
Income must come from qualifying activities and/or qualifying counterparties as defined in the current Ministerial Decision (MD 229 of 2025) and the Corporate Tax law. Excluded activities are listed separately.
3. No election into the standard regime
The entity must not have elected to be subject to the standard 0%/9% CT regime for the period. The election, once made, applies for the specified number of periods.
4. Arm's-length transactions
All transactions with related parties and connected persons must be at arm's length and supported by appropriate transfer-pricing evidence proportionate to the entity's size and complexity.
5. Audited financial statements
The entity must prepare and maintain audited financial statements for the relevant tax period, in accordance with the Ministry of Finance's audit requirements.
6. Non-qualifying revenue within de minimis
Non-qualifying revenue in the tax period must not exceed the lower of 5% of total revenue or AED 5 million. Breaching this threshold disqualifies the entity from QFZP status for the period.
Based on Federal Decree-Law 47 of 2022 (Art. 18) and Ministerial Decision 229 of 2025. Older guidance referring to MD 265 of 2023 should not be relied on without checking the current decision.
Worked example: the de minimis test
Facts (illustrative):
- • Total revenue in the tax period: AED 80 million.
- • Revenue from qualifying activities and qualifying counterparties: AED 77 million.
- • Non-qualifying revenue (e.g. sales to UAE mainland customers that do not qualify): AED 3 million.
De minimis threshold: lower of 5% × AED 80m = AED 4m, or AED 5m. Lower figure = AED 4m.
Result: Non-qualifying revenue of AED 3m is below the AED 4m threshold, so the de minimis condition is met. The entity remains a QFZP for the period (subject to all other conditions). Non-qualifying income is still taxable at the standard rate; only qualifying income benefits from 0%.
Change the facts (e.g. total revenue AED 60m, non-qualifying revenue AED 3.5m) and the test may fail; the lower of 5% and AED 5m becomes AED 3m, and AED 3.5m breaches the limit.
What the assessment delivers
- • Mapping of revenue streams to qualifying activities and qualifying counterparties under MD 229/2025.
- • Substance review: assets, employees, premises and core income-generating activity location.
- • De minimis calculation using current and projected revenue.
- • Audit status review and recommendation for the audit opinion period.
- • Related-party transaction flag and arm's-length considerations.
- • Written risk register with remediation options for any failing condition.
- • Clear statement of what is in doubt and what further evidence is needed before filing.
The assessment is an advisory product. It does not bind the FTA and does not substitute for a tax ruling. If a ruling is required, we scope that separately.
QFZP assessment
TaxSey professional fee for a single entity. Group structures and deep TP work are quoted separately.
Book an assessmentFrequently asked questions
Does a free-zone licence guarantee 0% Corporate Tax?
No. The 0% rate is conditional. A free-zone entity must meet every QFZP condition for the whole tax period, and 0% applies only to qualifying income. Non-qualifying income is taxed at the standard rate; breaching a core condition typically disqualifies the entity for the current period and four following periods.
Which revenue is non-qualifying?
Broadly, revenue from excluded activities (such as certain banking, insurance and natural-person transactions) and revenue from UAE mainland customers that is not from qualifying activities. The exact list is in MD 229/2025; we map each stream during the assessment.
Do I need audited financial statements?
Yes. QFZP status requires audited financial statements for the tax period, prepared to IFRS. If you do not currently appoint an auditor, you should do so before the end of the period in which 0% is being claimed. Audit work is a separate scope and not included in the assessment fee.
What happens if a condition fails?
The entity typically loses QFZP status for the tax period in which the condition failed and for the subsequent four tax periods, making all income taxable at the standard 0%/9% rate. The assessment identifies failing conditions early so you can remediate or budget for the standard regime.
Is the assessment the same as an FTA approval?
No. The FTA does not pre-approve QFZP status on a routine basis. The assessment is an evidence-backed opinion that supports the position taken on the Corporate Tax return. If a formal clarification is required, we scope that separately.
Book a QFZP assessment
Share your trade licence, revenue breakdown and most recent financial statements. We confirm scope and the AED 2,500 fee in writing.