A Free Zone Person (FZP) who meets the requirements to be considered a “Qualifying Free Zone Person” (or “QFZP”) can take advantage of a special opportunity to benefit from a 0% Corporate Tax rate under the UAE’s evolving corporate taxation framework. The Corporate Tax Law’s strict requirements for this unique status guarantee that only organisations that fulfil all requirements are eligible to benefit from it.
To achieve and preserve QFZP status, a FZP needs to meet several essential criteria. Among these requirements are the FZP’s ability to generate qualifying income, maintain sufficient substance inside a Free Zone, and refrain from choosing to be subject to the regular corporate tax laws and rates. They must also ensure that their non-qualifying revenue satisfies the de minimis requirements, maintain audited financial statements, and adhere to the arm’s length principle. A range of activities qualify as qualifying income for a QFZP, as long as they are carried out with specific beneficiaries and under particular conditions.
Ancillary activities play a significant role in the qualifying income criteria. These activities are closely related to or necessary for the primary qualifying activity, even though they are not the main activity. If an activity is required to complete the primary activity, contributes minimally to it, and is so closely related to it that it shouldn’t be seen as a separate activity, it is classified as ancillary.
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