UAE QFZP Status in 2026: How to Qualify for the 0% Corporate Tax Rate

UAE's Qualifying Free Zone Person (QFZP) status preserves the 0% corporate tax rate on qualifying income, instead of the standard 9% mainland rate. Qualifying isn't automatic. Small mistakes can disqualify you.

The 5 QFZP requirements

Be a free zone entity — registered in any UAE free zone.
Maintain adequate substance — actual employees, office space, and operational activity in the zone.
Earn qualifying income — most foreign-sourced income, qualifying B2B income within free zones.
Comply with transfer pricing rules — arm's-length pricing for related-party transactions.
Maintain audited financial statements — annual audit by FTA-approved auditor.

What counts as "qualifying income"

Income from outside UAE (foreign clients).
Income from other free zone entities.
Income from passive holdings (dividends, capital gains, royalties on IP).
Income from designated zones for re-export activities.

What disqualifies you (de minimis breach)

Income from UAE mainland sources is "non-qualifying." You can have some non-qualifying income — the de minimis threshold is the lower of 5% of total revenue or AED 5M annually. Exceed that, and you lose QFZP status for the entire year, retroactively. All your income then taxes at 9%.

Common QFZP mistakes

Letting mainland UAE billing creep above 5% without realising.
Using a free zone shell with no substance (no actual office, no real employees).
Missing annual audit deadlines.
Mispricing related-party transactions (intra-group services, royalties).
Not registering for corporate tax with FTA on time.

Action items

Register your free zone entity for corporate tax with the Federal Tax Authority within 9 months of incorporation. Engage an FTA-approved auditor for annual audit. Track invoicing carefully by client geography. If approaching the 5% threshold, restructure proactively — split mainland-facing services into a separate mainland LLC.