UAE Federal Tax Authority: Free Zone Person tax bulletin

Verified source fact: the bulletin states that a Qualifying Free Zone Person can receive a 0% rate on Qualifying Income, while non-qualifying income is subject to 9%. Conditions include adequate free-zone substance, Qualifying Income, no election into the standard regime, arm’s-length compliance, transfer-pricing documentation, audited financial statements and non-qualifying revenue not exceeding the lower of AED 5 million or 5% of total revenue. Failure causes loss of qualifying status from the relevant Tax Period and for the four subsequent Tax Periods.

Horizon interpretation: the rate is an outcome of a controlled operating model, not a benefit attached automatically to a free-zone licence. Revenue streams should be mapped by activity, counterparty, permanent establishment, property and intellectual-property treatment. Governance should also prove people, assets, expenditure, transfer pricing and audited accounts. One failed condition can affect multiple periods, so sales and contracting decisions need tax review before revenue is booked.

Next check: confirm that the entity and zone meet the current statutory definitions, then classify every material revenue stream against the latest Qualifying and Excluded Activity decisions. Recalculate the de minimis test during the year, verify audit and transfer-pricing requirements and check the current FTA registration, return and record-retention rules. Use the detailed FTA guide and current legislation for any transaction decision.