Qualifying Free Zone Persons (QFZP) — UAE Corporate Tax
A Qualifying Free Zone Person (QFZP) is a free zone entity that meets specific conditions under UAE CT Law and benefits from a 0% Corporate Tax rate on qualifying income.
Who Can Be a QFZP?
Any juridical person (company) that is a tax resident in a designated UAE free zone — provided it meets all four conditions below.
The Four QFZP Conditions
1. Adequate Substance The entity must have genuine economic substance in the free zone:
- Sufficient employees and payroll in the free zone
- Adequate operating expenditure in the free zone
- Core income-generating activities conducted in the free zone
2. Qualifying Income At least the majority of income must be from qualifying activities as listed in CT Decision No. 55 of 2023. Examples include:
- Manufacturing or processing of goods
- Holding of shares in qualifying group entities
- Shipping and logistics services
- Reinsurance and fund management
- Headquartering services
- Treasury and financing services within a qualifying group
3. Non-Qualifying Revenue Cap Revenue from non-qualifying activities must not exceed AED 5 million or 5% of total revenue (whichever is lower). Exceeding this threshold disqualifies the entity from QFZP status for that period.
4. Audited Financial Statements The entity must maintain audited financial statements prepared in accordance with IFRS.
What Happens to Non-Qualifying Income?
Non-qualifying income within a QFZP entity is taxed at 9%, not 0%. Careful income classification is essential.
QFZP vs Standard Taxpayer
| Feature | QFZP | Standard |
|---|---|---|
| Rate on qualifying income | 0% | N/A |
| Rate on non-qualifying income | 9% | 9% (above AED 375k) |
| Audit required | Yes | No (mainland) |
| Transfer pricing rules | Full application | Standard |
| SBR eligible | No | Yes (if ≤ AED 3M) |
Kounted can assess your free zone entity's QFZP eligibility, help you structure your activities to qualify, and handle the CT filing.