What is a qualifying free zone person? The UAE corporate tax status

Article 3(2)(a) of Federal Decree-Law No. 47 of 2022 applies a 0% rate to a Qualifying Free Zone Person's Qualifying Income, and the Ministry of Finance describes the same benefit. Article 18(1) lists the conditions. The entity must maintain adequate substance in the State, derive Qualifying Income, not have elected to be subject to the standard regime under Article 19, and comply with Article 34 (the arm's length principle) and Article 55 (transfer pricing documentation), along with any other conditions set by decision.

• Adequate substance in the UAE
• Qualifying Income as defined in the rules
• No election into the standard regime under Article 19
• Arm’s length pricing and transfer pricing documentation

For a trading or services company in a free zone in Dubai, Abu Dhabi or Ras Al Khaimah, QFZP status can be the difference between a 0% and a standard corporate tax bill on its qualifying profits. Income that is not Qualifying Income does not get the 0% rate, so the split of revenue by type and customer matters.

The status also shuts other doors. Qualifying free zone persons cannot elect small business relief. And because transfer pricing rules apply, dealings with a mainland sister company or the owner need to be priced at arm's length and documented.

HelloBooks lets you tag revenue by stream, customer type and location using classes or projects, so the accountant can see which income may be Qualifying Income and which is not. Related-party transactions can be tagged and reported separately for the transfer pricing file. The corporate tax computation support uses the same ledger, and the AI agent can answer questions like 'how much revenue came from mainland customers this year?'.

Free zone companies can request a chart of accounts and reports built around their qualifying and non-qualifying income by booking a call at /book-a-demo. Decisions on QFZP status stay with your tax adviser.

Concepts tied to QFZP status.

• Free zone company
• Arm’s length principle
• Small business relief
• Designated zone
• Taxable person