The direct answer: 0% depends on qualification and income
A Qualifying Free Zone Person is taxed at 0% on qualifying income and 9% on taxable income that is not qualifying income. A free-zone licence alone does not establish that status. Review the conditions and each income stream for the relevant tax period.
The conditions
- Maintain adequate substance for the income-generating activities.
- Identify qualifying income, including the relevant counterparty and activity tests.
- Meet the de minimis condition and arm’s-length requirements.
- Prepare audited financial statements and do not elect into the ordinary rates.
The de minimis limit
Under Decision 229 of 2025, non-qualifying revenue must not exceed the lower of 5% of total revenue and AED 5 million for the tax period. Use the regulatory calculation, not a simple percentage of all invoiced sales: specified permanent-establishment, property and intellectual-property revenue receives separate treatment.
For arithmetic only, assume AED 8 million is the correctly determined denominator and AED 300,000 is the relevant non-qualifying revenue. The limit is AED 400,000: the lower of 5% × AED 8 million and AED 5 million. AED 300,000 falls below that limit. This does not establish the company's status without the other conditions.
What losing it costs
Failure can remove QFZP status from the start of the relevant tax period and for the following four tax periods. Those are tax periods, not automatically five calendar years. Escalate uncertain income classification before signing a new contract, not only when preparing the return.
Review the actual customer and transaction
Transactions with another Free Zone Person involve a beneficial-recipient test and excluded-activity rules. Transactions with non-free-zone persons involve the qualifying-activity rules. Property, permanent establishments and intellectual property need separate analysis. Do not label every mainland customer as automatic loss of status or every free-zone invoice as automatically qualifying.
Decision 229 of 2025 replaced Decision 265 of 2023. Its changes include commodity-trading and treasury/financing clarifications. The FTA's 2024 guide is useful background, but read it with later decisions rather than treating its older activity list as the final current rule.
| Question for the review | Useful working evidence |
|---|---|
| Who receives the goods or services? | Customer legal identity, location, contract and end-use information. |
| What generates the income? | A revenue schedule mapped to contracts rather than only general-ledger labels. |
| Where is the work performed? | A description of the people, assets and operating arrangements behind the activity. |
| Can the calculation be reproduced? | A reconciliation from financial statements to the classification and de minimis working. |
| Has the position changed? | New products, customers, premises and related-party arrangements reviewed before year-end. |
Build a review pack before the return
Assign one owner to keep the revenue mapping and open questions current. Save the reason for a classification alongside the evidence, rather than using a colour-coded spreadsheet with no explanation. Reconcile the pack with the financial statements and resolve differences with the tax preparer and independent auditor.
Meraki can help organise books, return-preparation inputs and audit-ready records. An independent auditor issues the audit opinion; neither a formation package nor bookkeeping alone certifies QFZP eligibility.
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