UAE QFZP — Qualifying Free Zone Person Complete Rules Guide 2026
QFZP (Qualifying Free Zone Person) status allows UAE free zone companies to benefit from the 0% corporate tax rate on qualifying income. Understanding QFZP rules is critical for free zone companies to maintain 0% CT status. This guide covers UAE QFZP rules in full for 2026.
In this guide:
What Is a QFZP?
- A UAE free zone company (juridical person) that meets specific UAE CT conditions to qualify for 0% CT on qualifying income
- Not automatic: QFZP status requires the company to meet ALL conditions; if any condition is violated, the company becomes taxable at 9%
- Full duration: QFZP status covers a 5-year tax period initially; can be renewed for further 5-year periods
QFZP Conditions
- 1. UAE free zone company: must be a juridical person incorporated in a UAE free zone and registered under UAE free zone law
- 2. Maintains adequate substance: must have adequate substance in the UAE (offices, employees appropriate to activities)
- 3. Derives qualifying income: income must be from qualifying sources (see below)
- 4. Non-qualifying income threshold: total non-qualifying income must not exceed the lower of AED 5,000,000 or 5% of total income
- 5. Complies with transfer pricing: QFZP must comply with UAE CT transfer pricing rules and maintain required documentation
- 6. Maintains audited accounts: must have audited financial statements
Qualifying Income for QFZP
- Income from transactions with other free zone companies or persons: trading, services, consulting conducted within UAE free zones or with other QFZP-registered entities
- Income from qualifying intellectual property assets: royalties from qualifying IP; 0% CT applies
- Income from transactions with non-UAE resident persons: income from international clients and customers (outside UAE) is qualifying income
- Income from UAE mainland: transactions with UAE mainland companies and individuals is NON-qualifying income; subject to 9% CT
The De Minimis Non-Qualifying Income Rule
- Small amounts of mainland income permitted: QFZP can have some UAE mainland income without losing QFZP status
- Threshold: non-qualifying income must be the LESSER of AED 5,000,000 or 5% of total income
- Example: company earns AED 2,000,000 total; 5% = AED 100,000; if mainland income is AED 80,000 (below AED 100K) → still QFZP; if mainland income is AED 150,000 (above AED 100K) → QFZP lost for that period
- De minimis calculation must be checked each tax period
Losing QFZP Status
- If ANY QFZP condition is violated in a tax period, the entire company’s income for that period becomes taxable at 9% (including the qualifying income)
- Re-election: after losing QFZP status, the company must wait 5 years before re-electing QFZP
- Practical risk: do not sell goods or services directly to UAE mainland customers above the de minimis limit; route mainland activity through a separate mainland entity if significant