Table of Contents
Frequently Asked Questions
Which activities qualify for the 0% Corporate Tax rate in a UAE free zone?
Qualifying activities include manufacturing, processing, trading of qualifying commodities, holding shares and securities, ship ownership and management, reinsurance, fund and wealth management, and logistics services. Headquarter, treasury and financing services to related parties, aircraft financing and leasing, and distribution from a designated zone also qualify. The Ministry of Finance sets the list, and the Federal Tax Authority applies it.
Can a free zone company serve mainland customers and keep the 0% rate?
Yes, but only within limits. Income from mainland customers is generally non-qualifying unless it comes from a qualifying activity. Total non-qualifying revenue must stay within the de minimis limit, or the company loses its qualifying status.
What happens if non-qualifying revenue exceeds the de minimis limit?
The company stops being a qualifying free zone person. It loses the 0% rate for that tax period and the four periods after it, five in total. Its taxable income is then charged at the standard rates: 0% up to AED 375,000 and 9% above that.
How is the de minimis limit calculated?
Non-qualifying revenue must not exceed the lower of 5% of total revenue or AED 5 million in a tax period. For a company with AED 10 million in revenue, the cap is AED 500,000, so AED 600,000 of non-qualifying income breaches it. Revenue from excluded activities counts towards the limit.
Do individual clients affect a free zone company's tax status?
Yes. Transactions with natural persons are an excluded activity, so that income does not qualify for the 0% rate. A consultancy that invoices individuals directly can breach the de minimis limit quickly. Companies should separate this revenue and track it in their records.
Does a free zone company need to register for Corporate Tax if its rate is 0%?
Yes. Registration with the Federal Tax Authority is a separate duty from holding a free zone license. A company must register, file a Corporate Tax return and declare its qualifying status, even where its qualifying income is taxed at 0%.
Are audited financial statements compulsory for a qualifying free zone company?
Yes. Keeping audited financial statements is one of the conditions of a qualifying free zone person. The company must also maintain adequate substance in the free zone and comply with transfer pricing rules. Meydan Plus (mPlus) brings together Meydan Free Zone’s business support offerings, one of which is mAccounting, covering bookkeeping, VAT, Corporate Tax and payroll.
Which authority decides a free zone company's Corporate Tax status?
The Federal Tax Authority decides a company's Corporate Tax status, under rules set by the Ministry of Finance. Meydan Free Zone issues the Business License digitally, but it does not determine tax treatment. Tax status is tested every tax period.
Topic Summary
What a Qualifying Free Zone Person Means
A qualifying free zone person is a free zone company that meets the conditions set under the Corporate Tax Law and Ministry of Finance decisions. It pays 0% Corporate Tax on qualifying income and 9% on other income, provided it keeps adequate substance, follows transfer pricing rules and stays within the de minimis limits.
Which Qualifying Activities Earn the 0% Rate
Qualifying activities include manufacturing, processing, trading of qualifying commodities, holding shares for investment, shipping, reinsurance, fund and wealth management, headquarter and treasury services to related parties, aircraft financing and leasing, designated zone distribution and logistics services. Ministerial Decision No. 229 of 2025 sets the full list.
Excluded Activities That Trigger the 9% Rate
Excluded activities never qualify for the 0% rate, even inside a free zone. They include transactions with natural persons, banking, insurance, most finance and leasing, ownership or exploitation of UAE immovable property (except commercial property located in a free zone and transacted with other free zone persons), and ancillary activities to these.
De Minimis Limits and the Cost of Breaching Them
The de minimis rule lets a qualifying free zone person earn limited non-qualifying revenue without losing the 0% rate. That revenue must not exceed the lower of 5% of total revenue or AED 5 million in a tax period. Exceeding either limit removes qualifying status for that period and the following four.
How to Confirm Your Status as a Qualifying Free Zone Person
To confirm status, register for Corporate Tax with the Federal Tax Authority, map each revenue stream to a qualifying or excluded category, check the de minimis limits, document substance, keep audited financial statements, and declare your position in the Corporate Tax return. Review it every tax period.
How Meydan Free Zone Companies Apply the Rules
A Meydan Free Zone company holds a digitally issued Business License, but the Federal Tax Authority decides its Corporate Tax status. Match your licensed activity to a qualifying category and separate excluded income. Meydan Plus (mPlus) brings together Meydan Free Zone’s business support offerings, one of which is mAccounting. It covers bookkeeping, VAT, Corporate Tax and payroll.
Conclusion
Becoming a qualifying free zone person depends on activity, income mix and records, not on the license alone. Map revenue early, watch the de minimis limits and keep audit-ready records. Before choosing a license activity, list your expected revenue streams and test each one against the qualifying and excluded categories.”
Qualifying Activities for the 0% Free Zone Corporate Tax Rate
For a free zone founder in Dubai, the 0% Corporate Tax rate can look automatic. It isn’t. A free zone license doesn’t secure it. Only a qualifying free zone person gets 0%, and only on qualifying income. Other income is taxed at 9%.
This guide explains which activities qualify, which are excluded, how the de minimis limits work, and how to protect the 0% rate when choosing your license activities with Meydan Free Zone.
What a Qualifying Free Zone Person Means
A qualifying free zone person is a free zone company that meets the conditions set under the Corporate Tax Law and Ministry of Finance decisions. It pays 0% Corporate Tax on qualifying income and 9% on other income, provided it keeps adequate substance, follows transfer pricing rules and stays within the de minimis limits.
Meet the Conditions
A qualifying free zone person must maintain adequate substance in the free zone, earn qualifying income, not elect to be taxed under the standard Corporate Tax regime, comply with transfer pricing rules, stay within the de minimis limits and prepare audited financial statements. Picture a Meydan Free Zone trading company with audited accounts and invoices that fall into qualifying categories. It keeps 0% on that income and pays 9% on anything else.
Understand Why the License Alone Isn't Enough
Registering for Corporate Tax with the Federal Tax Authority is a separate duty. Status is tested every tax period, and a failure can remove the 0% rate. A founder who assumes a license means no Corporate Tax will usually find out at the first return. Meydan Free Zone issues your license digitally, but the Federal Tax Authority decides tax treatment. For a wider comparison, read qualifying vs non-qualifying corporate tax in the UAE.
Which Qualifying Activities Earn the 0% Rate
Qualifying activities include manufacturing, processing, trading of qualifying commodities, holding shares and securities for investment for at least 12 months, owning, managing and operating ships, reinsurance, fund management, wealth and investment management, headquarter services to related parties, treasury and financing services to related parties, aircraft financing and leasing, distribution in or from a designated zone, logistics services, and activities ancillary to these. They are set out in Cabinet Decision No. 100 of 2023 and Ministerial Decision No. 229 of 2025, which replaced Ministerial Decision No. 265 of 2023.
Review the Core Activities
- Manufacturing and processing of goods.
- Trading of qualifying commodities.
- Holding shares and securities.
- Logistics services.
A Meydan Free Zone company that has held shares in a regional subsidiary for at least 12 months is a clear example of a qualifying free zone person earning qualifying income.
Qualifying vs Excluded Activities at a Glance
| Feature | Qualifying Activities | Excluded Activities |
|---|---|---|
| Manufacturing and processing | Qualifies at 0%, including sales to other free zone persons | Not excluded in itself, but income outside the rules is taxed at 9% |
| Trading of qualifying commodities | Qualifies at 0% when the commodity has a quoted price from a recognised price reporting agency | Other goods, such as retail-packaged products sold to mainland customers, are taxed at 9% |
| Holding shares and securities | Qualifies at 0% as a listed activity | Banking or insurance activity within a group is excluded |
| Transactions with natural persons | Qualifies only where the activity is specifically carved out | Excluded, so taxed at 9% |
| UAE immovable property (limited exceptions) | Commercial property in a free zone, transacted with other free zone persons, can qualify | Other property ownership or exploitation is excluded |
Check Income From Other Free Zone Persons
Transactions with other free zone persons are generally qualifying, except for excluded activities. Income from a non-free zone person qualifies only if it comes from qualifying activities. A free zone trader selling to another free zone company is usually safe, but the same sale to a mainland retailer needs closer testing. Our guide to qualifying income under UAE Corporate Tax covers the detail.
Count Ancillary Activities
Activities that support a qualifying activity can qualify under Ministry of Finance decisions. Warehousing that supports a qualifying trading activity is a typical case.
Excluded Activities That Trigger the 9% Rate
Excluded activities never qualify for the 0% rate, even inside a free zone. They include transactions with natural persons, banking, insurance, most finance and leasing, ownership or exploitation of UAE immovable property (except commercial property located in a free zone and transacted with other free zone persons), and ancillary activities to these.
Spot the Common Exclusions
- Transactions with natural persons.
- Banking, insurance and most finance and leasing.
- UAE immovable property, with limited exceptions.
A consultancy invoicing individual clients directly falls into the first group. A Meydan Free Zone license doesn't change that treatment.
Separate Mainland Income
Income from mainland customers is generally not qualifying unless it comes from qualifying activities. A trading company with both free zone and mainland customers should keep separate records for each stream. Mixed books make the de minimis test hard to defend.
De Minimis Limits and the Cost of Breaching Them
The de minimis rule lets a qualifying free zone person earn limited non-qualifying revenue without losing the 0% rate. That revenue must not exceed the lower of 5% of total revenue or AED 5 million in a tax period. Exceeding either limit removes qualifying status for that period and the following four.
Calculate the Threshold
The test runs per tax period, and revenue from excluded activities counts. Take a company with AED 10 million of revenue. Its 5% cap is AED 500,000, so AED 600,000 of non-qualifying income breaches it.
Understand the Breach Consequences
Status is lost for five tax periods in total, and taxable income is charged at standard Corporate Tax rates. A founder who bills individual clients above the limit pays for five years, not one.
How to Confirm Your Status as a Qualifying Free Zone Person
To confirm status, register for Corporate Tax with the Federal Tax Authority, map each revenue stream to a qualifying or excluded category, check the de minimis limits, document substance, keep audited financial statements, and declare your position in the Corporate Tax return. Review it every tax period.
Follow the Checklist
- Register with the Federal Tax Authority.
- Map each revenue stream to a category.
- Test the de minimis limits.
- Document substance and transfer pricing.
- Prepare audited financial statements.
A newly licensed trading company should map its first quarter of invoices this way before it books a second quarter.
Keep the Records Regulators Expect
- Contracts and invoices sorted by customer type.
- Evidence of staff and premises.
- Transfer pricing documentation where related parties exist.
Our Meydan Free Zone corporate tax requirements guide explains the audit side.
How Meydan Free Zone Companies Apply the Rules
A Meydan Free Zone company holds a digitally issued Business License, but the Federal Tax Authority decides its Corporate Tax status. Match your licensed activity to a qualifying category and separate excluded income. Meydan Plus (mPlus) brings together Meydan Free Zone’s business support offerings, one of which is mAccounting. It covers bookkeeping, VAT, Corporate Tax and payroll.
Match Your License Activity to Qualifying Categories
Choose activities before applying for your business license with Meydan Free Zone. A company choosing commodity trading starts from a qualifying category. One built around services to individuals starts with excluded income.
Use mAccounting for Compliance
Monthly bookkeeping through mAccounting can tag each invoice by customer type, giving you the revenue categories the de minimis test needs. That turns a year-end scramble into a routine check.
Expert Financial and Tax Compliance Services in Dubai
Explore mAccountingConclusion
Becoming a qualifying free zone person depends on activity, income mix and records, not on the license alone. Map revenue early, watch the de minimis limits and keep audit-ready records. Before choosing a license activity, list your expected revenue streams and test each one against the qualifying and excluded categories.
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- Federal Tax Authority (FTA), UAE, Corporate Tax guidance on qualifying free zone persons.
