Answer:
Entities established in a Free Zone that qualify as Qualifying Free Zone Persons will be subject to the following UAE Corporate Tax rates (Article 3 (2) of Federal Decree-Law No. 47 of 2022):
- 0% on Qualifying Income, as defined under Article 18 of Federal Decree-Law No. 47 of 2022 and Cabinet Decision No. 100 of 2023.
- 9% on any non-Qualifying Income.
Example:
A Free Zone company provides treasury and headquarter services to related parties in other Free Zones and earns AED 1,000,000 in the Tax Period.
Of this:
- AED 800,000 is from Qualifying Activities with Free Zone Persons.
- AED 200,000 is from leasing property to individuals (an Excluded Activity).
Result:
- AED 800,000 → taxed at 0%.
- AED 200,000 → taxed at 9%, as it is non-Qualifying Income.
If non-Qualifying Income exceeds 5% of total revenue or AED 5 million, the company may lose its QFZP status and be taxed entirely under the regular regime (Article 3 of Ministerial Decision No. 265 of 2023.