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- Separate the licensing location from the company’s tax status.
- Review income streams, customers, activities and substance together.
- A Qualifying Free Zone Person has ongoing compliance requirements.
What does the 0% free zone rate actually depend on?
The FTA’s free zone guidance distinguishes Qualifying Income, other taxable income and the conditions for qualifying status. Treat those as separate checks. Choosing a free zone address answers the incorporation question, not the entire tax question.
Build a realistic revenue forecast before relying on any headline tax claim. It should describe the work and counterparties, not just a total sales figure.
Why is an overseas customer not the whole answer?
Because the rules consider the nature of the income and transaction, alongside the other conditions. “We only invoice abroad” is useful background, but it is not a complete tax analysis. Ask your adviser to assess the actual service or goods, customer type and any relevant exclusions.
Use a table with one row per revenue stream. Include the activity, customer location and type, where delivery occurs and the expected amount. It is easier to review than a general description of an “international business”.
What ongoing requirements should you budget for?
Qualifying status involves conditions such as adequate substance, qualifying income and compliance with transfer-pricing requirements. The framework also requires audited financial statements for Qualifying Free Zone Persons. Ask how those requirements apply to your operation and include the necessary accounting work in the budget.
What could change the position later?
- A new service or product line.
- A different customer or transaction type.
- Mainland or overseas operational presence.
- Changes in the people and resources supporting the business.
- Missing records or compliance requirements.
Review material changes before signing the new work. Do not assume the tax conclusion made at incorporation lasts unchanged as the company grows.
What should you ask your tax adviser to confirm?
Request the basis for qualifying status, how each income stream is treated and which conditions you must monitor. A Qualifying Free Zone Person’s non-qualifying taxable income can be taxed at 9% without the ordinary AED 375,000 zero-rate band. Check the current rules, including any de minimis treatment, using the full facts.
Our tax coordination service can help organise that review alongside the licensing decision.
