What is QFZP (Qualifying Free Zone Person)?
A Qualifying Free Zone Person is a Free Zone entity that meets specific tests under the UAE Corporate Tax law to retain the 0% rate on Qualifying Income. Tests include: substance (people and assets in the Free Zone), audited financial statements, transfer pricing compliance, de minimis non-qualifying revenue (≤5% or AED 5m).
Finn does your books in United Arab Emirates
AccountsOS runs full accounting for United Arab Emirates businesses, tax, deadlines and invoicing, in plain English. Ask Finn about yours, no signup needed.
Current Rate (Annual; tested each financial year)
0% on Qualifying Income (vs. 9% for non-qualifying)
Example
A Dubai Multi Commodities Centre (DMCC) trading FZCO sells to other Free Zone companies and non-UAE customers in qualifying activities. It maintains audited accounts and adequate substance — qualifies for QFZP, taxed at 0% on the qualifying portion.
How QFZP (Qualifying Free Zone Person) works in United Arab Emirates
Qualifying Income includes: - Income from transactions with other Free Zone Persons (excluding excluded activities) - Income from qualifying activities with non-UAE customers (manufacturing, trading commodities, holding shares, etc.) - Specific qualifying intellectual property income
Excluded activities and income from mainland UAE customers (other than those treated as 'Domestic Permanent Establishments' or specific allowed activities) attract the 9% rate. Failing the de minimis test (non-qualifying income > 5% of total or AED 5m, whichever is lower) disqualifies the entity from QFZP for 5 years.
Related terms
UAE Corporate Tax is the federal tax on business profits introduced by Federal Decree-Law No. 47 of 2022, effective 1 June 2023. It applies a 0% rate on the first AED 375,000 of taxable income and 9% above. Qualifying Free Zone Persons can pay 0% on Qualifying Income. Multinational groups within Pillar Two scope face a 15% Domestic Minimum Top-up Tax from 1 January 2025.
UAE Free Zones are special economic zones offering 100% foreign ownership, customs benefits, and (subject to QFZP rules) preferential 0% Corporate Tax on Qualifying Income. There are 40+ Free Zones across the seven emirates, each with their own Authority and licensing rules.
An FZCO is a Free Zone Company with multiple shareholders (typically 2 or more, depending on the Free Zone Authority). It is a separate legal entity with limited liability, registered with a specific UAE Free Zone Authority. Common form for founder-led businesses with co-founders.
Confused by United Arab Emirates accounting jargon?
AccountsOS explains United Arab Emirates terms in plain English and applies the right rules to your books automatically.
Try Free