What is 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 3 – Qualifying Income 1. For the purposes of application of Article 18 of the Corporate Tax Law, Qualifying Income of the Qualifying Free Zone Person shall include the below categories of income, provided that such income is not attributable to a Domestic Permanent Establishment or a Foreign Permanent Establishment in accordance with Article 5 of this Decision, or derived from the ownership or exploitation of immovable property in accordance with Article 6 of this Decision, or considered Taxable Income under Clause 2 of Article 7 of this Decision: a. Income derived from transactions with a Free Zone Person, except for income derived from Excluded Activities. b. Income derived from transactions with a Non-Free Zone Person, but only in respect of Qualifying Activities that are not Excluded Activities. c. Income derived from the ownership or exploitation of Qualifying Intellectual Property under Clause 1 of Article 7 of this Decision. d. Any other income provided that the Qualifying Free Zone Person satisfies the de minimis requirements under Article 4 of this Decision. 2. For the purposes of paragraph (a) of Clause 1 of this Article, income will be considered as derived from transactions with a Free Zone Person where that Free Zone Person is the Beneficial Recipient of the relevant services or Goods. 3. For the purposes of this Article, the term “Beneficial Recipient” shall mean a Person who has the right to use and enjoy the service or the Good and does not have a contractual or legal obligation to supply such service or Good to another person and the term “Good” shall mean tangible or intangible property that has economic value in dealing including movable and immovable property. 4. For the purposes of determining whether a Qualifying Free Zone Person has a Domestic Permanent Establishment, the provisions of Article 14 of the Corporate Tax Law shall apply and the expression “Qualifying Free Zone Person” shall be used instead of the expression “Non-Resident Person”, and the expression Cabinet Decision No. 100 of 2023 – As published by Ministry of Finance 3 “geographical areas outside the Free Zones in the State” shall be used instead of the word “State”, wherever used in that Article.

Article 4 – De minimis Requirements 1. The de minimis requirements shall be considered satisfied where the nonqualifying Revenue derived by the Qualifying Free Zone Person in a Tax Period does not exceed a percentage of the total Revenue of the Qualifying Free Zone Person in that Tax Period as specified by the Minister, or an amount specified by the Minister, whichever is lower. 2. Subject to Clause 3 of this Article, the following provisions shall apply: a. Non-qualifying Revenue is Revenue derived in a Tax Period from any of the following: 1) Excluded Activities. 2) Activities that are not Qualifying Activities where the other party to the transaction is a Non-Free Zone Person. 3) Transactions with a Free Zone Person where such Free Zone Person is not the Beneficial Recipient of the relevant services or Goods. b. Total Revenue is all Revenue derived by a Qualifying Free Zone Person in a Tax Period. 3. The following Revenue shall not be included in the calculation of non-qualifying Revenue and total Revenue: a. Revenue derived from the following transactions in relation to immovable property located in a Free Zone: 1) Transactions with a Non-Free Zone Person in respect of Commercial Property. 2) Transactions with any Person in respect of immovable property that is not Commercial Property. b. Revenue attributable to a Domestic Permanent Establishment or a Foreign Permanent Establishment of the Qualifying Free Zone Person. c. Revenue derived from the ownership or exploitation of intellectual property, Cabinet Decision No. 100 of 2023 – As published by Ministry of Finance 4 except for the Revenue related to the Qualifying Income referred to in Clause 1 of Article 7 of this Decision. 4. For the purposes of this Article, a Qualifying Free Zone Person and its Domestic Permanent Establishment or Foreign Permanent Establishment shall be treated as if the establishment was a separate and independent Person that is a Related Party of the Qualifying Free Zone Person.

(adequate assets, an adequate number of qualified full-time employees, and incur an adequate amount of operating expenditures) in a Free Zone that is commensurate to the level of its activities. Q Can a Free Zone Person conducting high-seas sales or third-port trading using overseas warehouses be considered as performing core income-generating activities of the Qualifying Activity of distribution within the Free Zone for Qualifying Free Zone Person status? A It depends on the facts and circumstances. Overseas warehousing and shipping would not automatically disqualify a Free Zone Person from Qualifying Free Zone Person status if the Free Zone Person undertakes its core income-generating activities in a Designated Zone, and having regard to the level of activities carried out, has adequate assets and an adequate number of qualified full-time employees in a Designated Zone, and if the Free Zone Person incurs adequate operating expenditure, in relation to such activity. Q If a Free Zone Person (not located in a Designated Zone) is a distributor and sells goods to another Free Zone Person, how can it determine whether that customer is the Beneficial Recipient of the goods, and whether the income is therefore Qualifying Income of a Qualifying Free Zone Person25? A Where a sale of goods results in the legal ownership passing to the customer and the goods are at the disposal and discretion of the customer, including the right to resell the products to its own customers without any contractual or legal obligation between the distributor and the customer requiring it to do so, the customer is considered to be the Beneficial Recipient of the goods as the customer has the free right to use and enjoy the goods. Q If a Qualifying Free Zone Person carries on a Qualifying Activity of trading in Qualifying Commodities26 and sells those Qualifying Commodities to another Free Zone Person, do they need to determine whether that customer was the Beneficial Recipient27 of the goods? A No, where a Qualifying Free Zone Person sells goods to another Free Zone Person as part of a Qualifying Activity of trading in Qualifying Commodities, it does not need to determine whether the customer is the Beneficial Recipient. The Beneficial Recipient test is only relevant when the Qualifying Free Zone Person does not conduct a Qualifying Activity or an Excluded Activity28, and they have derived income from transactions with another Free Zone Person. Q Is income from the sale of goods to a Free Zone Person considered Qualifying Income of a Qualifying Free Zone Person29 if the goods or materials that give rise to the sales are not purchased from a Free Zone Person? A Yes, income from the sale of goods to a Free Zone Person who is the Beneficial Recipient of the goods will be considered Qualifying Income, even where the goods imported or purchased by the Qualifying Free Zone Person in deriving such Qualifying Income are imported or purchased from Non-Free Zone Persons. 25 Article 3(1)(a) and Article 3(3) of Cabinet Decision No. 100 of 2023 26 Article 2(c) of Ministerial Decision No. 229 of 2025 27 Article 3(3) of Cabinet Decision No. 100 of 2023 28 Article 3(1)(b) of Cabinet Decision No. 100 of 2023 29 Article 3(1)(a) of Cabinet Decision No. 100 of 2023 6