UAE Corporate Tax: What Are Qualifying Activities for 0% Tax Rate? 2026
UAE free zone companies can benefit from a 0% corporate tax rate on qualifying income if they meet the QFZP (Qualifying Free Zone Person) conditions. Here is the 2026 guide.
In this guide:
What Is the QFZP 0% Tax Rate?
- UAE CT: Standard rate is 9% on taxable income above AED 375,000
- QFZP rate: 0% on qualifying income; 9% on non-qualifying income
- Eligibility: UAE free zone company that meets all QFZP conditions
QFZP Conditions (All Must Be Met)
- Maintain adequate substance in UAE: Real office, staff, or management in UAE
- Derive qualifying income only (or mostly): Revenue from qualifying activities
- Comply with transfer pricing rules: If dealing with related parties
- Prepare audited financial statements: Annual audit required for QFZP
What Is Qualifying Income for QFZP?
- Income from transactions with other free zone persons or companies: 0% rate
- Income from qualifying activities with UAE mainland: Complex rules; check with tax advisor
- Qualifying manufacturing and processing activities: 0% rate
- Income from headquarters functions: 0% rate
- Ship, aircraft operating income: 0% rate
What Is NOT Qualifying Income
- Income from UAE mainland clients (selling goods/services to UAE mainland companies): 9% rate applies
- Passive income from UAE real estate: 9% rate applies
- Income from financial services to UAE mainland: 9% rate
The De Minimis Rule
- If non-qualifying income is less than 5% of total income OR AED 5 million: QFZP status is maintained
- Above de minimis: QFZP status may be lost for that tax period; 9% applies to all income