Free-zone Corporate tax advisory
A free-zone licence is not a blanket tax exemption. SAIF Chartered Accountants helps Dubai and UAE businesses assess QFZP eligibility, classify income and organise the evidence behind their Corporate tax position.
Tax agency registration · TAN 30004113
Start with the meaning
A Free Zone Person is a juridical person registered, established or incorporated in a UAE free zone, including eligible branches. A Qualifying Free Zone Person (QFZP) meets the conditions for 0% Corporate tax on qualifying income. An individual with a free-zone permit is not, on that basis, a Free Zone Person.
A Designated Zone is a specifically recognised area—not a synonym for every free zone. That distinction matters particularly for goods distribution.
For a business owner asking “is my free-zone company tax-free?”, the useful answer starts with the entity, what it earns and how it operates—not simply the name on its licence.
Basis: FTA Free Zone Persons guide, read with the subsequent decisions linked below. This evidence checklist helps organise an assessment; it is not a self-certification of eligibility.
Customer, activity and evidence
Income can qualify where the customer is a Free Zone Person and the beneficial recipient, provided no excluded activity or special rule overrides it. Beneficial recipient means it can use and enjoy the supply without a legal or contractual obligation to pass it on.
The activity normally needs to be a listed Qualifying Activity and not an Excluded Activity. Exporting a service does not automatically qualify it. Other revenue may fall within the de minimis rules.
Permanent establishments, property and intellectual property need separate analysis. Patents and copyrighted software can involve a qualifying-IP nexus calculation; trademarks are not qualifying IP.
Other income can be qualifying when the de minimis requirements are met, subject to the separate permanent-establishment, property and IP rules. Do not assume every amount in the non-qualifying-revenue calculation must itself be taxed at 9%.
Income framework and exceptions: Cabinet Decision 100 of 2023, Articles 3–8.
Ministerial Decision 229 of 2025 replaced Decision 265. Its categories include the following, each subject to its detailed definition:
Banking is excluded. Dealings with individuals, insurance, finance/leasing and property have specified exceptions. For example, certain regulated investment-management services and the permitted free-zone commercial-property case are treated differently. Ancillary excluded activities also matter. Match the transaction to the full definition before applying a category.
The MoF’s 2025 update also explains expanded commodity coverage, own-account treasury activity and distribution to public benefit entities.
Apply the rules to real questions
These simplified scenarios show which question to resolve first. They assume an eligible entity; none is a complete determination of QFZP status.
| Business situation | Starting point | Evidence to collect |
|---|---|---|
| Consultancy for a free-zone company’s own operations | The free-zone-customer route may apply if the customer is the beneficial recipient and the service is not excluded. | Customer status, service contract and confirmation of how the advice is used. |
| Ordinary consultancy for mainland or overseas clients | Consultancy is not itself a listed Qualifying Activity. Normally include this revenue in the de minimis analysis; an overseas billing address does not fix the issue. | Revenue split, actual deliverables and any distinct qualifying activity. |
| Manufacturing goods sold to mainland businesses | A listed qualifying activity may support qualifying income. Mainland sales do not automatically cause loss of status. | Production records, contracts and location of manufacturing operations. |
| Goods distributor serving resellers | Examine the Designated Zone, customer and import conditions, plus the applicable AUP requirement. | Customer resale evidence, customs records and goods movements. |
| Mainland branch or other permanent establishment | Attribute its profit separately. A branch’s tax treatment is not the same question as a sale to a mainland customer. | Branch accounts, functions, assets, risks and cost allocations. |
Illustrations applying the qualifying-income framework and current activity definitions. Mixed businesses require separate revenue streams, not one label for the entire company.
A revenue test—not a profit allowance
The numerator includes excluded-activity revenue, non-qualifying activities with Non-Free Zone Persons and relevant transactions where a free-zone customer is not the beneficial recipient. Remove prescribed permanent-establishment, property and IP revenue from both numerator and denominator.
Assume AED 12 million total revenue comprises AED 11.6 million from qualifying transactions and AED 400,000 from ordinary consultancy to Non-Free Zone Persons. There are no special-category exclusions.
5% × AED 12 million = AED 600,000. AED 400,000 is below this limit. The de minimis test passes; if the other conditions are satisfied, the residual income can qualify too.
Keep total revenue at AED 12 million, but change the mix to AED 11.3 million from qualifying transactions and AED 700,000 from that consultancy activity.
AED 700,000 exceeds AED 600,000. This is not a tax charge only on the AED 100,000 excess: the company fails the de minimis condition.
How exclusions change the calculation: if total recorded revenue is AED 14 million, including AED 2 million attributable to a domestic permanent establishment, the test base is AED 12 million, assuming no other exclusions. Remove that AED 2 million from the numerator too; separately calculate the establishment’s taxable profit.
When the AED 5 million cap matters: with a relevant revenue base of AED 140 million, 5% is AED 7 million. The lower limit is AED 5 million.
Example calculations using Cabinet Decision 100 and Ministerial Decision 229; other eligibility conditions and special income rules still apply.
A failed condition generally removes QFZP status for the affected period and the following four periods. For example, failure in a calendar-year 2026 tax period generally affects 2026–2030. Ordinary Corporate tax rules then apply—not simply a 9% charge on the excess revenue.
Separate income streams, separate decisions
Rental income, branch profits and software royalties should not be grouped together as “other sales”. Identify the asset, customer and place of business before choosing a tax treatment.
Commercial-property income from a transaction with a Free Zone Person can qualify, subject to the relevant conditions. Commercial property supplied to a Non-Free Zone Person, and non-commercial property supplied to anyone, falls within the separate 9% taxable-income rules. The corresponding revenue is excluded from both sides of the de minimis calculation.
Retain the lease, permitted and actual use, property location and tenant’s status. Residential accommodation is not commercial property merely because a company pays the rent.
A sale to an overseas customer follows the activity and customer analysis; it is not automatically foreign-branch income. Profits attributable to a foreign permanent establishment are dealt with separately, including consideration of any available exemption or foreign tax credit under the applicable rules.
For an overseas operation, collect local accounts, tax records and details of the functions performed. Separate the tax paid abroad from the UAE calculation rather than assume it settles both obligations.
Qualifying intellectual property uses a nexus calculation linked to eligible research and development expenditure. Non-qualifying IP income and amounts outside the qualifying calculation follow the separate taxable-income rules. A software business should distinguish service fees from income arising from ownership or exploitation of IP.
Sources: Cabinet Decision 100, Articles 5–7, and FTA Free Zone Persons guide, sections 5 and 7–9. The relevant facts and any exemption conditions must be tested.
Substance, audit and transfer pricing
Core income-generating work must take place in the required free zone or Designated Zone, with resources proportionate to the activity. There is no single staffing number suitable for every company. Outsourcing requires appropriate location and supervision; qualifying-IP research has special rules.
Decision 84 of 2025 requires audited financial statements for QFZPs regardless of revenue for periods starting on or after 1 January 2025; the earlier audit requirement also applied to QFZPs. Agree the audit engagement separately from this assessment and scope specialist transfer-pricing work.
Additional distributor requirements
FTA Decision 6 of 2026 applies from tax periods starting on or after 1 January 2026 to QFZPs undertaking the specified distribution activity in or from a Designated Zone. It requires an independent auditor’s agreed-upon procedures report under ISRS 4400.
The procedures examine reseller status and relevant importation through a Designated Zone. Prepare customer confirmations, transaction records, customs and shipping documents. The report is due within 30 days after the Corporate tax return deadline unless the FTA determines another date.
This is additional to the financial-statement audit, not a replacement. It reports factual findings, not an assurance opinion or a guarantee of 0% treatment. Scope applicability early; it is not a universal requirement for every free-zone business.
Zero tax does not mean zero compliance
Yes. A 0% outcome does not remove registration and annual filing obligations. The standard return and payment deadline is nine months after the tax period ends. Keep supporting records for at least seven years after the relevant period, subject to any additional applicable requirements.
Review new customers, revenue categories, outsourced work and related-party arrangements. Escalate a potential threshold breach while management can still understand its consequences.
Reconcile the assessment to audited accounts, allocate costs between income categories and resolve material assumptions. Identify who approves the tax position.
Retain the filed return, calculations and evidence together. Track the separate distributor AUP deadline where applicable and carry unresolved actions into the next review.
See FTA guide, section 12. Coordinate Corporate tax registration and return filing with the assessment.
A practical assessment engagement
Our work focuses on a documented decision your finance team can use. We agree the entities, periods and deliverables first, rather than offer a fixed package that assumes every free-zone company has the same risks.
Agree entities, periods, activities and the decisions requiring advice.
Organise revenue by transaction, counterparty and supporting evidence.
Evaluate eligibility, calculations and unresolved technical questions.
Explain the position, limitations and prioritised action list.
Agree audit, specialist analysis, filing or corrective work separately.
Start with the licence, ownership structure, accounts, trial balance, sales breakdown, customer details, contracts, staffing and premises records, related-party schedules and previous returns.
An agreed assessment report with the evidence reviewed, material classifications, calculation schedules where included, open questions and a management action plan.
We quote according to your company profile and scope. Multiple activities, incomplete records and complex cross-border transactions require different work from a focused single-entity review.
Useful controls include onboarding questions for new customers, revenue coding that supports the analysis, periodic exception reviews and a named owner for missing evidence. These controls make the year-end assessment more manageable; they do not replace technical judgment.
From accounting records to the tax return
A QFZP remains a taxpayer even when no Corporate tax is payable. Financial reporting provides the starting point; accounting profit is not automatically the final taxable income. The accounts, income classification and tax adjustments need to tell the same story.
Not solely because some income qualifies and some does not. The FTA does not require separate financial statements for those income categories, but the supporting schedules must substantiate the split.
Ask your accountant for a reconciliation showing where every material revenue category appears in the trial balance, financial statements and Corporate tax return. Resolve unexplained differences before submission.
Attribute identifiable costs directly. Allocate shared deductible expenses on an appropriate arm’s-length basis reflecting their benefit or use—not automatically by revenue. Tax deductibility is a separate check from accounting recognition.
Record the rationale for each allocation, who approved it and why any method changed. A spreadsheet percentage without supporting evidence is difficult to explain during a review.
Assume a AED 100,000 support cost benefits two operations. Reliable usage records attribute 30% to the separately taxable operation and 70% to the qualifying operation. If that basis is appropriate and the cost is deductible, the allocation is AED 30,000 and AED 70,000. This is a cost-allocation example—not a complete tax calculation.
See FTA guide, sections 5.4 and 12.3–12.4. For weak or incomplete ledgers, address accounting and bookkeeping before finalising the tax schedules.
Maintain the position throughout the year
A useful compliance framework gives each check an owner. Management, the accountant and tax professionals should agree how new facts reach the person responsible for the tax position.
Distinguish a loss of QFZP eligibility from a filing, payment or record-keeping breach. They are not the same issue. Preserve the original records, identify the affected periods and seek a review of any tax adjustment, correction procedure or administrative penalties that may apply. Do not quietly overwrite an earlier assessment.
SAIF can scope a Corporate tax compliance review or FTA tax audit support where needed. An assessment does not itself amend a submitted return or guarantee relief from penalties.
No. The company must meet the Qualifying Free Zone Person conditions, and the income must be analysed under the applicable rules. Start with the business facts, not the marketing description of the licence.
Yes, subject to its licensing permissions. For Corporate tax, manufacturing income and ordinary consultancy income can have different outcomes even with the same mainland customer. Apply the qualifying-activity rules, de minimis test and any permanent-establishment rules; a mainland invoice alone does not determine the tax rate.
No. An overseas customer does not by itself make income qualifying. Review the relevant activity and other conditions. This is particularly important for consulting, software and other service businesses.
Non-qualifying revenue for this test must not exceed the lower of 5% of the relevant total revenue or AED 5 million. Apply the prescribed exclusions before calculating the limit; it is a revenue test, not a percentage of profit.
It generally loses QFZP status from the start of the affected tax period and for the next four tax periods. The consequences extend beyond taxing only the excess revenue. Obtain a period-specific assessment before filing.
Yes. The Corporate tax audited-financial-statement requirement applies to Qualifying Free Zone Persons regardless of revenue. A tax eligibility report is not a substitute for audited financial statements.
A QFZP does not receive the standard 0% band on its first AED 375,000 of non-qualifying taxable income. Its qualifying income is taxed at 0%, while its other taxable income is generally taxed at 9%.
There is no separate QFZP approval application in place of meeting the conditions. A Free Zone Person is treated as qualifying unless a condition is not met or it elects for the ordinary regime. Corporate tax registration and an accurate annual return are still required.
No. The terms are not interchangeable. Check the legally recognised area and the activity-specific requirements, particularly for distribution. A free-zone address alone does not establish Designated Zone treatment.
The fee depends on the company profile, activities, revenue streams, counterparties, records and technical issues. SAIF provides a scoped quotation; statutory audit, agreed-upon procedures, benchmarking and filing should be separately identified.
Before relying on 0% treatment, entering a material new transaction or completing the return. Revisit the assessment when operations, customers, staffing, premises or income streams change.
Potentially. Ordinary consultancy supplied to a Free Zone Person that is the beneficial recipient can follow the free-zone-customer route, provided no exclusion applies. Ordinary consultancy to mainland or overseas customers is not itself a listed Qualifying Activity; that revenue normally enters the de minimis test. All other QFZP conditions still matter.
Neither automatically passes nor automatically fails. The resources and supervision must fit the actual income-generating work. A lease alone is insufficient evidence. For outsourced work, document who performs it, where it happens and how your company supervises it.
No, while it remains a QFZP. The relief and group restrictions are separate from the de minimis allowance. Electing into the ordinary regime has multi-period consequences and does not automatically establish eligibility for a relief.
Yes. An election applies from the beginning of the selected tax period and for the following four tax periods. Compare the consequences for the whole business before electing; it is not a choice to switch back to QFZP treatment the next year.
No. Corporate tax treatment does not determine VAT treatment. Review supplies and VAT obligations separately rather than applying the QFZP conclusion to your invoices.
No adviser can guarantee the authority’s acceptance. We can analyse the facts, identify evidence gaps and explain the support for a position, subject to scope and the information available.
Translate the supported position into the annual tax calculation and disclosures.
Corporate tax return filing →Check the evidence behind calculations or a return already prepared.
Corporate tax compliance review →Assess the implications of a new revenue stream, structure or transaction.
Impact assessment →Sources checked 28 September 2026. This overview is not a determination of any company’s tax status. Apply the current law to the relevant facts and period.
Before relying on 0%
Share your activities, customer profile and tax period. We will help define the assessment and evidence required.
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