Qualifying income free zone tracking, invoice by invoice

You ask in plain English, the AI does the bookkeeping work, and you or your accountant approve the result.

• You ask: “What share of my revenue this year is non-qualifying, and how much headroom do I have?”
• The AI agent: The agent totals revenue by income-stream tag, calculates non-qualifying revenue as a share of the total and in AED, and compares it with the lower of AED 5 million and 5% of total revenue.
• You review: Your tax agent decides which activities count as qualifying for your business and confirms the tags. The agent applies them; it does not make the legal judgement.

Under the FTA's corporate tax guidance, a qualifying free zone person pays 0% on qualifying income, and taxable income that is not qualifying is taxed at 9%. One of the conditions is a de minimis test: non-qualifying revenue in the tax period must not exceed the lower of AED 5 million and 5% of total revenue. Breaching it can cost the business its qualifying status.

Which activities are qualifying depends on the free zone rules, the type of customer and the nature of the work. That decision belongs with a tax adviser. The bookkeeping job is to record each sale so the adviser's decision can be applied consistently.

You agree a short list of streams with your adviser, for example "Free zone distribution", "Export to overseas customers", "Mainland retail sales" and "Rental of mainland property". Each item and customer can carry a default stream, so most invoices are tagged without anyone thinking about it. The agent flags invoices where the default looks wrong, such as a mainland customer billed under a free zone item.

• Default stream by customer or by item
• AI flag on mismatches between customer location and stream
• Running de minimis gauge on the dashboard
• Profit and loss by stream for the tax computation

A distributor in Jebel Ali Free Zone expects total revenue of AED 24 million this year. Five per cent is AED 1.2 million, which is lower than AED 5 million, so AED 1.2 million is its ceiling. By the end of August, HelloBooks shows AED 830,000 tagged non-qualifying, mostly direct sales to mainland retailers.

The agent warns that at the current pace the business will reach about AED 1.25 million by December. The finance manager raises it with the tax adviser in September, while there is still time to plan, rather than finding out when the return is prepared.