- Free-zone status alone does not create a 0% result.
- A Qualifying Free Zone Person must satisfy every required condition.
- Non-qualifying taxable income can be subject to 9%.
The starting position
A Free Zone Person is subject to corporate tax. The special regime can apply 0% to qualifying income and 9% to taxable income that is not qualifying, provided the person meets all statutory conditions.
- Maintain adequate substance
- Derive qualifying income
- Meet transfer-pricing requirements
- Keep audited financial statements where required
Where businesses go wrong
Common errors include treating all overseas revenue as qualifying, ignoring mainland transactions, failing de minimis tests, overlooking excluded activities or keeping insufficient substance and records.
- Classify every revenue stream
- Map counterparties and locations
- Review related-party pricing
- Monitor conditions throughout the period
Annual review is essential
The revenue mix and operating model can change. Re-test qualification before year-end and before signing material new contracts.
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This guide is informed by current official guidance. Rules, fees and authority practice can change.
Important: This article is general information, not legal, tax, immigration or financial advice. Eligibility and obligations depend on your facts and the current rules of the relevant authority.