Qualifying Free Zone Person in UAE Corporate Tax 2025: Eligibility, Rules, and Tax Rates Explained

The UAE has emerging corporate tax regulations. The question many businesses would like to know is how this works. Free Zone companies also receive special benefits. Nonetheless, the advantages do not apply to all. It is possible to retain the Qualifying Free Zone Person UAE corporate tax status in 2025 for some firms. Others may lose it. 

You have to obey the rules to retain this status. You must know the tax rates. You should also ensure that your income is earned through the appropriate activities. The UAE has set clear laws. They desire Free Zone companies to remain very powerful and yet to adhere to equitable international tax regulations.

That is why it is so necessary to know about the Qualifying Free Zone Person UAE corporate tax in 2025. This manual clarifies the qualifying individuals, the eligible activities, and how to be safe under the new tax regime.

Understanding UAE Corporate Tax for Free Zone Person

In June 2023, the UAE corporate tax was launched. Zero corporate taxes previously characterized the UAE. It was one of the reasons why investors adored it. However, with the adjustment of tax laws around the world, the UAE had to change with it.

In 2023, the UAE introduced corporate tax. It was a big shift. Before this, there were very few taxes in Free Zones. The QFZP corporate tax UAE law now draws a definite line. There is still 0 percent Free Zone income, and other income has 9 percent.

The purpose is simple. The UAE is desirous of being a business centre. It is also interested in demonstrating to the world that it is not a tax haven. The UAE demonstrates that Free Zone businesses do exist and are operational by employing such rules as substance, audited accounts, and lists of qualifying activities.

Free Zones, therefore, remain strong. They are no longer, however, tax-free space. To enjoy the benefits of free zone company tax in the UAE, you should be aware of the new law. The Qualifying Free Zone Person UAE corporate tax regime is in place to secure the global advantage of the UAE. It rewards firms that are rule-takers, maintain substance, and have their eye on qualifying activities. It remains a great business advantage to many.

What are Free Zones in the UAE?

Free Zones are designated business zones within the UAE. They have been geared towards luring international investors. These areas are separate from regulators and laws. The design is oriented towards certain industries such as shipping, media, healthcare, trading, and technology.

Some popular Free Zones are:

• Dubai Multi Commodities Centre (DMCC).
• Jebel Ali Free Zone (JAFZA).
• Dubai Airport Free Zone (DAFZA).
• Abu Dhabi Global Market (ADGM).
• Sharjah Airport Free Zone (SAIF).

There are numerous benefits of Free Zones. They provide such free zone company tax benefits to the UAE as:

• 100% foreign ownership.
• No need for a local partner.
• Globally rated offices, warehouses, and ports.
• Easy customs rules.
• Quick Business setup in Dubai and other emirates.
• Visa and work permit support.

In the present day, there are over 45 Free Zones in the UAE. Both of them are constructed with a purpose. Dubai Internet City can be selected as a tech start. Traders may go for JAFZA. Finance firms can select ADGM. That is why today, numerous world companies and start-ups prefer to establish their business in Free Zones in Dubai and other emirates.

About UAE Corporate Tax in Free Zones

The Free Zone corporate tax is different. The UAE free zone corporate tax 0% vs 9% relies on the nature of income.

• Qualifying activities income is taxed at 0%.
• Non-qualifying income, an income on which no exemption applies, is taxed at 9%.

This equilibrium is enabling the UAE to comply with world tax regulations, such as the OECD standards, and not to make Free Zones unattractive. But the thing is, here is that you have to obey substance rules. That refers to real offices, personnel, and operations within the Free Zone.

Failing that? Your Qualifying Free Zone Person UAE corporate tax exemptions are revoked.

Who is a Qualifying Free Zone Person (QFZP)?

Qualifying Free Zone Person is a business registered in a Free Zone, which fulfils the special tax regulations. In accordance with MD 229 of 2025 QFZP regulations, such companies will receive 0% taxation on qualifying income.

But who counts?

• It requires you to be licensed in a Free Zone.
• You have to adhere to the substance requirements free zone UAE.
• You have to adhere to the transfer pricing regulations.
• You must not elect to pay 9% tax.

In case any of these fail, you do not have the QFZP corporate tax UAE status anymore. When lost, your income becomes subject to taxation, as with companies of the mainland.

Qualifying eligibility of a person in a free zone 2025

The eligibility for the 2025 qualifying free zone persons is evident in 2025. To qualify, you must:

• Be established in a Free Zone.
• Only make money in what you can qualify for.
• Record and audited accounts.
• Adhere to the FTA.

It is not just paperwork. It is an indication that you are a legitimate business. Otherwise, you lose the Qualifying Free Zone Person UAE corporate tax advantage.

What are Non-Qualifying Activities and Qualifying Activities?

Not all income gets the 0% rate. There are two types of income as divided by the law.

Qualifying Activities

• Processing and manufacturing.
• Trading with other companies of the Free Zone.
• Ship management.
• Fund management.
• Holding company activities.
• Export and logistics.

Non-Qualifying Activities

• Direct sales to the mainland of the UAE without a distributor.
• Free Zones are not involved in real estate transactions.
• The income from excluded activities that are established by law.

It is essential to know the variances between qualifying vs excluded activities UAE. The only income you can keep 0% is the qualifying income.

Taxation rates of free zone persons

The tax rate will vary based on the type of income:

• No corporate tax payable on qualifying income.
• Corporate tax of 9% on non-qualifying income, or in case of failure to qualify.

It is a system that enables Free Zones to remain competitive. Concurrently, it guarantees equity to the mainland companies. Qualifying Free Zone Person, UAE corporate tax is a privilege. Businesses have to gain it through legal obedience.

UAE free zone corporate tax 0% vs 9%

Let’s make this simple.

• You can benefit from a 0 percent corporate tax in case of trade with other Free Zone companies.
• When you are dealing with mainland companies, you may have to contend with 9% of corporate tax.

So, the choice is clear. Organize your business intelligently. That is why most companies employ a PRO services company in UAE. They are the ones to guide you on setups, resulting in you not losing your tax benefits.

de minimis rule QFZP UAE

The de minimis rule QFZP UAE is rather flexible. It provides that in case your non-qualifying income is low, you may have 0 percent tax.

The limit is:

• 5% of total revenue, or
• AED 5 million,
• whichever is lower.

It is to ensure that firms are safe despite having small non-qualifying income. Violating it, however, and you will lose your QFZP corporate tax UAE privileges.

Provided that your non-qualifying income does not exceed this threshold, you are still a Qualifying Free Zone Person. When you go beyond it, you forfeit the benefit. As an example, when your total revenue is 100 million AED, your non-qualifying revenue should not exceed 5 million AED. However, in case your overall revenue is AED 20 million, then it can only have 5 percent non-qualifying (AED 1 million).

Audited accounts requirement for QFZP

All Qualifying Free Zone Persons’ UAE corporate tax status is based on proper accounting. QFZP must have the audited accounts requirement.

Why? Because the FTA wants proof. The audit is required to be done by licensed auditors. Your eligibility will be in danger without audited reports. This is included in the UAE corporate tax compliance free zones.

To this end, many firms are outsourcing this to the PRO services in Dubai to save on the expensive errors.

Checklist for Free Zone Tax Compliance

To keep your 0% rate:

• Get licensed in a Free Zone.
• Only do qualifying activities.
• Hold non-qualifying income at de minimis levels.
• Satisfy the economic requirements of substance.
• Keep audited accounts.
• File returns on time.
• Do not submit to 9% tax where necessary.

Common Mistakes to Avoid

• Believing that all Free Zone earnings are tax-exempt.
• Violating auditing account regulations.
• A mere paper office only, naughty stuff.
• Failure to verify whether an activity is a qualifying one or not.
• Leaving out the filing of returns with FTA.
• These are the pitfalls that can cost you your QFZP corporate tax UAE benefits.

PRO is here to help

The new tax law is detailed. The small businesses will find it complicated. Here, PRO services company in UAE are involved. An excellent PRO service may assist in:

• Business setup in Dubai Free Zones.
• Corporate tax registration.
• Filing annual returns.
• Preparing compliance documents.
• Preparing audited accounts.
• Renewing licenses.

Savings in time, penalties are eliminated by using PRO services in Dubai. It makes sure that you do not accidentally lose the Qualifying Free Zone Person UAE corporate tax exemption. The right PRO service in Dubai would save you time, money, and stress. They ensure that you do not lose your Qualifying Free Zone Person UAE corporate tax position.

FAQs

Q1: What is a Qualifying Free Zone Person?

A Qualifying Free Zone Person is a Free Zone company that complies with and satisfies the eligibility and substance criteria established by the UAE to enjoy preferential corporate tax exemptions.

Q2: What tax rates apply?

The income of a QFZP is taxed at 0% and any non-qualifying income exceeding the permitted limits is taxed at the 9% UAE corporate tax rate.

Q3: What is the de minimis rule QFZP UAE?

The de minimis rule permits a zero tax in the case of non-qualifying income below 5% of all revenues or AED 5 million, whichever is lower.

Q4: Do I need audited accounts?

Yes, the requirement of audited accounts must be practiced by all Free Zone entities to make QFZP eligible and compliant with the requirements of the substance and corporate tax laws in the UAE.

Q5: PRO, can it assist in compliance?

Yes, the Free Zone companies in Dubai have the assistance of PRO services to do licensing, filing, renewals, and compliance to remain a QFZP and fulfill all the regulatory criteria.

Conclusion

The qualifying Free Zone Person in the UAE tax regime presents an opportunity and responsibility regarding corporate tax in 2025. Adhere to MD 229 of 2025 QFZP rules, address the qualifying free zone person eligibility 2025, and observe the substance requirements Free Zone UAE.

It is possible to have a Free zone company tax benefits UAE, such as 0% tax with smart planning, audited accounts, and the help of a PRO services company in the UAE.

That way, you remain in compliance, remain intelligent, and mix your business under the Free Zone program in the UAE.