Corporate Tax

Qualifying Income & De Minimis: What Actually Keeps Your Free Zone at 0%

5 July 2026 · 5 min read · Nuvaris Advisory Team

A UAE free zone licence does not automatically mean 0% tax. Only a Qualifying Free Zone Person pays 0%, and only on its Qualifying Income — everything else is taxed at the standard 9%. The de minimis rule is the single most common way businesses accidentally lose that status.

The de minimis threshold

A Qualifying Free Zone Person's non-qualifying revenue must not exceed the lower of AED 5 million or 5% of total revenue in a tax period. Non-qualifying revenue includes income from excluded activities, transactions with non-free-zone parties outside permitted categories, and certain related-party service income. Go even one dirham over the threshold, and QFZP status is lost.

The cost of breaching it

Failing the de minimis test — or any other QFZP condition — doesn't just cost you 0% for that year. The business is treated as a standard taxable person at 9% on its entire income for the current tax period and the following four periods, with the option to retest QFZP status only from the sixth year onward.

Other conditions that must all hold at once

Maintaining adequate substance in the free zone

Deriving genuine Qualifying Income

Not having elected into the standard Corporate Tax regime

Complying with transfer pricing and arm's-length documentation

Preparing audited financial statements for the relevant tax period

The QFZP test is a gate, not a menu — every condition must hold simultaneously, every tax period, not just at setup.

See the FTA's Free Zone Person Corporate Tax guide at tax.gov.ae.

This article is for general information and reflects our understanding of FTA guidance at the time of writing. It isn't tax or legal advice — always confirm how these rules apply to your specific situation before acting.

Qualifying Income & De Minimis: What Actually Keeps Your Free Zone at 0%

Not sure if you're still within the de minimis threshold?