The free-zone questions to settle before year-end

The most expensive sentence in UAE Corporate Tax is “we’re in a free zone, so we’re at zero percent.” The 0% rate belongs to a Qualifying Free Zone Person earning qualifying income — both defined terms, neither automatic, and both tested with hindsight by the FTA.

Three questions, in order

First: is your income actually qualifying? Transactions with mainland UAE customers, income from excluded activities, and income attributable to a domestic or foreign permanent establishment all fall outside the definition. Map revenue streams against the qualifying-activities list — contract by contract, not in aggregate.

Second: do you meet de minimis? Non-qualifying revenue above the threshold does not just tax the excess — it disqualifies the entity entirely, for the current period and the following four. This cliff-edge is the single most misunderstood mechanic in the regime.

Third: can you evidence substance? Adequate people, premises and expenditure in the free zone, proportionate to the activity. A qualifying activity performed by nobody, nowhere, does not survive review.

Document now, not when asked

Every position — qualifying analysis, de minimis calculation, substance file, any election made — should exist as a dated paper before the return is filed. Positions documented contemporaneously read as judgement; positions assembled after an FTA query read as reconstruction.

TrueNorth’s Tax practice documents free-zone positions, prepares transfer pricing files and supports FTA clarifications and audits.