New Corporate Tax Guide 2024: Requirements For Free Zone Qualifying Person (QFZP) In Dubai, UAE 

Corporate Tax Requirements

On June 1st, 2023, the United Arab Emirates (UAE) implemented a completely new corporation tax system. For businesses operating in free zones, the structure has significant ramifications, particularly for those aiming to get the tax-free corporate rate on income that is subject to taxes. The criteria for defining a free zone person (QFZP) in Dubai, United Arab Emirates, as outlined in the most recent corporate tax guidance published in May 2024, will be covered in this blog.  

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An overview of the framework for corporate taxes 

The legal foundation for levying an income tax on corporations and company profits in the United States is established by the UAE Corporate Tax Law, Federal Decree-Law No. 47, dated 2022. The measure will go into effect for tax years starting on June 1, 2023, or later. The framework’s primary components are:  

  • Taxable Income Threshold: For businesses that do not fit the criteria to be qualified Free Zone Persons (QFZPs), income taxable over AED 375,000 is subject to a zero-corporation tax rate.  
  • The QFZPs or Qualifying Free Zone Persons: As long as they fulfill the precise criteria set forth by tax authorities, businesses operating in free zones are eligible for a 0% tax rate on income that qualifies for tax reasons. The company tax rate of 9% is applied to income that does not meet the qualifying threshold.  

Qualifications for Qualifying Free Zone Person Status (QFZP) 

To qualify for the 0% business tax rate, a free zone entity is required to fulfill the subsequent corporation tax obligations: Refer to Section 4.1.  

  • Maintain an appropriate substance within the UAE: The business must be present in the UAE with its physical assets and personnel.  
  • Earn Qualifying Income: The revenue must originate from business ventures carried out in the Free Zone or involving foreign customers.  
  • Refuse to Choose to Be Taxed at the Regular CT Rates: The company cannot choose to be subject to the regular corporate tax rates that are applicable to non-free zone entities.  
  • Non-Qualifying Income below De Minimis Criteria: The amount of non-qualifying income cannot be more than 5% of total revenue or 5 million AED, whichever is lower.  
  • International Financial Reporting Standards (IFRS)-compliant audited financial statements: Companies are required to maintain accurate financial records and have them audited in compliance with IFRS.  
  • Adhere to any further mentioned special requirements. According to the Free Zone Authority, it is crucial to abide by the additional requirements set forth by the local free zone authorities.  

Key Considerations for Free Zone Businesses  

Companies operating in free zones must ensure they fulfill the standards in order to benefit from the 0% corporate income tax rate. percentage of qualifying income. Among the crucial factors are:  

  • The corporate tax rate in the United Arab Emirates is applicable to income derived from a domestic permanent establishment, unless it is exempt. Income received from a head office outside of the Free Zone is covered by this.  
  • Transfer Pricing: Rates for regulated transactions must be determined in accordance with the arm’s length principle. This covers receiving and giving loans, products, services, and intangibles.  
  • Allocation of Expenses: The costs must be divided equally between the portions that qualify for income and those that do not.


Sample Situations 

Consider these situations to show how these needs are implemented.  

  • First scenario: Company D, a company based in the United Arab Emirates with headquarters outside the free zone, opens a branch there to carry out eligible operations. The business can take advantage of the no-tax corporate rate on eligible income originating from its branch, provided it satisfies the requirements to be classified as QFZP. The company tax rate applies to the income from the headquarters. 
  • Scenario 2: Business J is a corporation that generates taxable earnings from its head office and qualifies for income in the Free Zone. Its parent business is a Free Zone company, and it is designated as a Domestic Permanent Establishment (head office outside of the Free Zone). 

In Conclusion 

The most recent corporate tax guideline covers the requirements for businesses to meet the qualifications to become Qualifying Free Zone Persons (QFZPs), which is targeted at Free Zone Persons in Dubai, United Arab Emirates. Free Zone enterprises are eligible to benefit from the tax-free corporate rate on income that meets tax exemptions if they are aware of these requirements as well as other crucial factors. To guarantee they are in compliance with the rules and to maximize their tax strategies, businesses must carefully read the guidelines and consult with corporate tax specialists in Dubai. 

Next Step  

To help Free Zone enterprises in Dubai, United Arab Emirates, comply with the new tax laws pertaining to corporations and Free Zone persons, ebs Chartered Accountants is a vital resource for corporate tax advice. Our experts concentrate on offering comprehensive details regarding the requirements to become a qualified free person (QFZP) starting in May 2024. They will also make sure you abide by the regulations set forth by the tax authorities. They support the preparation of certified financial statements, the identification of non-qualifying earnings, and the assessment of an individual’s eligibility for qualifying income. Their knowledge of taxation and tax compliance will guarantee that businesses operate smoothly in the Free Zones by maximizing tax benefits and minimizing responsibilities. 

Get in touch with us right now!  

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