*No threshold of AED 375,000 applies to free zone companies.

What is QFZP?

A QFZP is a juridical person (company) operating in a Free Zone that receives Qualifying Income from Qualified Activities and meets Other Criteria to be entitled to a 0% corporate tax benefit.

‍

List of Qualified Activities:

• Manufacturing of goods or materials

• Processing of goods or materials

• Trading of Qualifying Commodities

• Holding of shares and other securities for investment purposes

• Ownership, management, and operation of Ships

• Reinsurance services

• Fund management services

• Wealth and investment management services

• Headquarters services to Related Parties

• Treasury and financing services to Related Parties

• Financing and leasing of Aircraft

• Distribution of goods or materials in or from a Designated Zone

• Logistics services. 

• Any activities that are auxiliary to the above Qualifying Activities 

‍

What is Qualifying Income*?

• Transactions with another Free Zone Person. 

• Transactions with Non-Free Zone Persons (domestic or foreign), only in case of ‘Qualifying Activities’.

• All other income, provided they satisfy the de minimis requirements.

* Qualifying income does not include income generated from domestic (Non-Free Zone) or foreign permanent establishments, immovable property outside the Free Zone, and certain other activities like income from non-commercial properties.

‍

Other Criteria 

• Maintain adequate substance in the UAE: Your business should have a significant presence in the UAE, including physical premises and employees.

• Generate qualifying income: Your income should primarily come from compliant business activities conducted within the Free Zone or with international clients.

• Do not elect to be part of normal CT rates: You should not choose to be taxed under the standard corporate tax rates applicable to non-Free Zone businesses.

• Non-qualifying revenue does not exceed the de minimis threshold: Your non-qualifying income should be below 5% of total revenue or AED 5 million, whichever is lower.

• Have audited financial statements in accordance with IFRS: You should maintain accurate financial records and have them audited in line with the International Financial Reporting Standards (IFRS).

• Meet any other specific conditions prescribed by the Free Zone authority: You should comply with any additional requirements set by the respective Free Zone authority.

‍

What is an Excluded Activity?

Free zone businesses involved in excluded activities may not be eligible for the 0% Tax rate benefits. 

• Any transactions with natural persons, except transactions in relation to ownership, management and operation of Ships, fund management services, wealth and investment management services, and financing and leasing of Aircraft, including engines and rotable components.  

• Banking activities 

• Insurance activities, other than reinsurance services, captive insurance related activities forming part of headquarter services to Related Parties. 

• Finance and leasing activities, other than ownership, management and operation of Ships, treasury and financing services to Related Parties, and financing and leasing of Aircrafts, including engines and rotable components. 

• Ownership or exploitation of Immovable Property. (If this is a Commercial Property and business transaction on that property is conducted with other free zone persons, then it is not an excluded activity). 

‍

Good News!

Small Business Tax Relief

Resident Persons (natural and juridical) can elect for Small Business Relief if their revenue is equal to or less than AED 3,000,000 in both the current and all previous Tax Periods. The revenue threshold will apply starting June 1, 2023, through December 31, 2026. 

For more information, contact Onecentive team at info@one-centive.com or at 050 727 9570.

‍