Free zone corporate tax: the Qualifying Free Zone Person conditions

Under Federal Decree-Law 47 of 2022, a free zone company pays 0% corporate tax only if it is a Qualifying Free Zone Person (QFZP), and only on its Qualifying Income; its other taxable income is taxed at 9%. The FTA's Free Zone Persons guide lists the conditions a company must meet, and Ministerial Decision 229 of 2025 sets out the qualifying and excluded activities and the de minimis limit. This guide summarises what those official documents say.

This guide summarises official publications. It is not tax advice; confirm your position with a licensed tax adviser.

The conditions

The FTA guide (CTGFZP1, May 2024, section 3.2) lists these conditions:

1. The regime applies to a Free Zone Person.
2. The Free Zone Person must maintain adequate substance in a Free Zone.
3. It must derive Qualifying Income.
4. It must not have elected to be subject to the standard corporate tax rules.
5. It must comply with the arm's length principle.
6. It must maintain transfer-pricing documentation.
7. It must maintain audited financial statements.
8. Its non-qualifying revenue must meet the de minimis requirements.

Ministerial Decision 229 of 2025 (Article 5) repeats the de minimis and audited-accounts conditions, referring to Ministerial Decision 84 of 2025 for the audited financial statements.

Losing the status

The FTA guide and Ministerial Decision 229 of 2025 both state that a company that fails a condition at any time in a tax period ceases to be a Qualifying Free Zone Person from the beginning of that tax period and for the four subsequent tax periods.

The de minimis limit

Ministerial Decision 229 of 2025 (Article 3) sets the de minimis requirement: non-qualifying revenue in a tax period must not exceed the lower of 5% of total revenue or AED 5,000,000.

Qualifying activities

Ministerial Decision 229 of 2025 (Article 2) lists the Qualifying Activities of a QFZP:

• 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
• headquarter services to Related Parties
• treasury and financing services to Related Parties or for its own account
• financing and leasing of aircraft
• distribution of goods or materials in or from a Designated Zone
• logistics services
• activities ancillary to the above

Excluded activities

The same Article lists Excluded Activities:

• any transactions with natural persons, except for certain qualifying activities (ships, fund management, wealth and investment management, aircraft financing and leasing)
• banking activities
• insurance activities, subject to the reinsurance and headquarter-services exceptions
• finance and leasing activities, subject to certain qualifying exceptions
• ownership or exploitation of immovable property, other than commercial property in a Free Zone transacted with a Free Zone Person
• activities ancillary to these

The Decision also defines several activities in detail, for example that shares are held for investment purposes when held for an uninterrupted period of at least 12 months, and the conditions for distribution in or from a Designated Zone. Read the Decision itself for the full text.

Which zones count as Free Zones for corporate tax?

Cabinet Resolution 54 of 2023 specifies the Free Zones for corporate-tax purposes by reference to an attached schedule. The FTA's Public Clarification TAXP010 explains that the definitions of Free Zone and Designated Zone differ between the corporate tax, excise and VAT laws, and that businesses must determine their status under each law separately. The FTA advises taxpayers to confirm with their free zone authority whether they are in a Free Zone or Designated Zone for corporate-tax purposes.

On zone pages, any statement about a zone's corporate-tax status is shown as the zone's own statement, together with this advice.

Questions to take to an adviser

• Which of your revenue streams fall within the qualifying activities, and which within the excluded activities?
• What share of your revenue would be non-qualifying, measured against the de minimis limit?
• What does adequate substance in the free zone mean for your activity: staff, premises and expenditure?
• What audit and transfer-pricing documentation will you need each year?

Comparing zones

The conditions above are set federally. When you compare zones, check whether each zone confirms its Free Zone status for corporate-tax purposes, which facilities it offers, and whether it requires audited accounts.

See the full DMCC vs IFZA comparison →

Package prices do not include audit or tax compliance costs, which come on top.

Next steps

Map your revenue streams against the official lists, then speak to a licensed tax adviser before you choose your zone and structure. If you are still shortlisting, the questionnaire narrows zones by activity and budget, and how we verify explains where our data comes from.