Corporate Tax
Free Zone Qualifying Income: What to Review During the Year
The Qualifying Free Zone Person regime applies where a free zone entity meets a set of conditions, including maintaining adequate substance, earning qualifying income, and staying within the de minimis requirement for non-qualifying revenue.
The condition that most often causes difficulty is the revenue mix. Where non-qualifying revenue is not tracked during the year, the position may only become clear at year end — by which point the treatment for the whole period is already determined.
A more workable approach is to track qualifying and non-qualifying revenue as part of the periodic close, so the position is visible while there is still time to review how transactions are structured and invoiced.
Substance and transfer pricing documentation should be maintained on the same basis. These are supporting requirements for the regime, and assembling them retrospectively is significantly harder than maintaining them through the year.
SR Accounting Advisory Team
This article is general information based on UAE legislation and published FTA guidance at the time of writing. It is not advice for a specific business — please get in touch to discuss how the rules apply to your circumstances.
