A belief spread that free-zone companies are beyond corporate tax. In truth, Federal Decree-Law No. 47 of 2022 subjected them to tax, but allowed a ‘Qualifying Free Zone Person’ a 0% rate on qualifying income only, under strict conditions.
What Is a ‘Qualifying’ Person?
It is one meeting cumulative conditions: genuine economic substance in the State, earning qualifying income, complying with transfer-pricing and record-keeping standards, and not electing into the standard regime. Failing any condition may forfeit the status.
When Do You Lose the Exemption?
- Earning non-qualifying income above the de minimis threshold.
- Weak economic substance (real staff, assets, and expenditure in the State).
- Breaching transfer-pricing requirements between related parties.
- Failing to keep records or file returns.
Losing the status may subject your entire income to 9% for several years, not the breaching year alone. Reviewing your structure in advance is cheaper than a later correction.
[Qualifying-income conditions and de minimis limits are governed by the Cabinet and Ministerial Decisions in force, and are subject to update — verify before relying.]
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