What are the conditions to be a Qualifying Free Zone Person?

Article 18 – Qualifying Free Zone Person 1. A Qualifying Free Zone Person is a Free Zone Person that meets all of the following conditions: a. Maintains adequate substance in the State. b. Derives Qualifying Income as specified in a decision issued by the Cabinet at the suggestion of the Minister. c. Has not elected to be subject to Corporate Tax under Article 19 of this DecreeLaw. d. Complies with Articles 34 and 55 of this Decree-Law. e. Meets any other conditions as may be prescribed by the Minister. 2. A Qualifying Free Zone Person that fails to meet any of the conditions under Clause 1 of this Article at any particular time during a Tax Period shall cease to be a Qualifying Free Zone Person from the beginning of that Tax Period. 3. Notwithstanding Clause 2 of this Article, the Minister may prescribe the conditions or circumstances under which a Person may continue to be a Qualifying Free Zone Person, or cease to be a Qualifying Free Zone Person from a different date. 4. The application of paragraph (a) of Clause 2 of Article 3 of this Decree-Law to a Qualifying Free Zone Person shall apply for the remainder of the tax incentive Federal Decree-Law No. 47 of 2022 and its amendments – Unofficial translation (as published by the Ministry of Finance) 25 period stipulated in the applicable legislation of the Free Zone in which the Qualifying Free Zone Person is registered, which period may be extended in accordance with any conditions as may be determined in a decision issued by the Cabinet at the suggestion of the Minister, but any one period shall not exceed (50) fifty years.

Article 5 – Other Conditions 1. In addition to the conditions set out in Clause (1) of Article (18) of the Corporate Tax Law, a Qualifying Free Zone Person must meet the following two conditions: a. Its non-qualifying Revenue does not exceed the de minimis requirements set out in Article (3) of this Decision. b. It prepares audited financial statements in accordance with any decision issued by the Minister on the requirements to prepare and maintain audited financial statements for the purposes of the Corporate Tax Law. 2. A Qualifying Free Zone Person that at any particular time during a Tax Period fails to meet any of the conditions set out in Clause (1) of Article (18) of the Corporate Tax Law and this Decision and any other conditions prescribed by the Minister shall cease to be a Qualifying Free Zone Person from the beginning of the relevant Tax Period and for the subsequent (4) four Tax Periods.

Article 5 - Other Conditions 1. In addition to the conditions set out in Clause (1) of Article (18) of the Corporate Tax Law, a Qualifying Free Zone Person must meet the following two conditions: Ministerial Decision No. 229 of 2025 – As published by the Ministry of Finance 11 a. Its non-qualifying Revenue does not exceed the de minimis requirements set out in Article (3) of this Decision. b. It prepares audited financial statements in accordance with Ministerial Decision No. 84 of 2025 referred to above and any decision that amends or replaces it. 2. A Qualifying Free Zone Person that at any particular time during a Tax Period fails to meet any of the conditions set out in Clause (1) of Article (18) of the Corporate Tax Law and this Decision and any other conditions prescribed by the Minister shall cease to be a Qualifying Free Zone Person from the beginning of the relevant Tax Period and for the subsequent (4) four Tax Periods.

FREE ZONE PERSONS BASIC TAX INFORMATION BULLETIN 1. Who should read this information bulletin? 4. What is a Free Zone for Corporate Tax purposes? Any person who wants to understand the provisions related to Free Zone Persons under the UAE Corporate Tax Law. A Free Zone for Corporate Tax purposes is a designated and defined geographic area within the UAE that is specified in a decision issued by the Cabinet at the suggestion of the Minister. 2. What are the provisions related to Free Zone Persons under UAE Corporate Tax? The Corporate Tax Law allows a Qualifying Free Zone Person to benefit from a 0% Corporate Tax rate on their Qualifying Income. The other income, which is not Qualifying Income, is subject to Corporate Tax at the standard rate of 9%. A Qualifying Free Zone Person is not eligible to benefit from the 0% Corporate Tax rate applicable on Taxable Income up to the AED 375,000 threshold and is subject to the rate of 9% on its entire Taxable Income that is not Qualifying Income. 3. Who is a Free Zone Person? A Free Zone Person is a juridical person that is incorporated, established, or otherwise registered in a Free Zone. This also includes the relevant Free Zone authorities and other Government Controlled Entities that are established in a Free Zone. A non-resident juridical person’s registered branch in a Free Zone will be considered a Free Zone Person (with the non-resident parent being considered as a Foreign Permanent Establishment). A UAE resident juridical person that has a branch registered in a Free Zone will be a Free Zone Person (with the UAE resident juridical person being considered as a Domestic Permanent Establishment) for the purposes of the Corporate Tax Law. A Designated Zone for Corporate Tax purposes is a designated zone according to what is stated in Federal Decree-Law No. 8 of 2017 on Valued Added Tax, and which has been included as a Free Zone in accordance with the Corporate Tax Law. All Taxable Persons should check with their respective Free Zone Authority to confirm if they operate in a Free Zone or Designated Zone for Corporate Tax purposes. 5. What are the conditions for a Free Zone Person to be a Qualifying Free Zone Person? A Free Zone Person will be deemed to be a Qualifying Free Zone Person unless the person: - fails to meet one of the conditions to be a Qualifying Free Zone Person, or makes an election to be subject to the standard Corporate Tax rules and rates. The conditions to be a Qualifying Free Zone Person are: - - A Person that is not a juridical person, such as a natural person or an Unincorporated Partnership, cannot be a Free Zone Person. - the Free Zone Person must maintain adequate substance in a Free Zone, the Free Zone Person must derive Qualifying Income, the Free Zone Person must not have made an election to be subject to the standard Corporate Tax rate, the Free Zone Person must comply with the arm’s length principle for transactions with Related Parties and for arrangements between the Free Zone parent and its Foreign Permanent Establishments or Domestic Permanent Establishments, the Free Zone Person must maintain Transfer Pricing documentation, the Free Zone Person must maintain audited Financial Statements, and the Free Zone Person’s non-qualifying Revenue must not exceed the lower of AED 5 million or 5% of its total Revenue (de minimis requirement).