Qualifying Free Zone Person (QFZP): The Complete Guide to Staying at 0% Corporate Tax in the UAE

Setting up a company in a UAE Free Zone is one of the most attractive moves for entrepreneurs, consultants, and global businesses. The UAE allows eligible Free Zone companies to legally operate at 0% corporate tax on qualifying income.

But this 0% rate is not automatic.
To stay tax-free, your company must meet specific criteria and maintain the status of a Qualifying Free Zone Person (QFZP).

This guide explains everything you need to know to protect your tax benefits, structure your company correctly, and stay fully compliant.

What Is a Qualifying Free Zone Person (QFZP)?

A QFZP is a company established in a UAE Free Zone that meets all requirements under the Corporate Tax Law to receive the 0% tax rate on qualifying income.

If the company fails any requirement, it may lose its QFZP status and get taxed at 9% on non-qualifying or all income (depending on the violation).

Why QFZP Status Matters

• 0% corporate tax on qualifying income
• Full foreign ownership
• Minimal restrictions on business activities
• Strong global reputation for tax compliance
• Ideal for digital businesses, consultants, and international service providers

Maintaining QFZP status basically means you keep your tax advantage long-term.

Understanding Qualifying vs Non-Qualifying Income

The UAE separates your revenue into two main categories:

1. Qualifying Income (0% Tax)

This includes income earned from:

Foreign Clients

• Services delivered outside the UAE
• Digital and remote services
• Online consulting
• Global e-commerce

Free Zone Clients

• Business transactions inside the same or other UAE Free Zones

Holding Company Activities

• Dividends
• Capital gains
• Shareholding management

2. Non-Qualifying Income (9% Tax)

Non-qualifying income generally includes:

UAE Mainland Income

• Services delivered to mainland clients
• Revenue derived through a mainland branch
• Commercial operations physically located in the UAE mainland

Exception: Passive income to mainland clients

In some cases, passive income (e.g., interest, royalties) can still be counted as qualifying, but this depends on activity type and structure.

The Official QFZP Requirements (You Must Meet All of Them)

Below are the requirements your business must satisfy, explained simply.

1. Your Business Must Be Registered in a Recognized UAE Free Zone

What counts as a recognized Free Zone?

All major Free Zones qualify, including:

• Ajman Free Zone
• Meydan
• IFZA
• SHAMS
• RAKEZ
• DMCC
• Dubai South
• Hamriyah
• JAFZA

Legal Structures That Qualify

• FZE – Free Zone Establishment (1 shareholder)
• FZC – Free Zone Company (2+ shareholders)

Mainland companies cannot be QFZPs

Only Free Zone entities are eligible.

2. You Must Maintain Adequate Substance in Your Free Zone

Your presence must be real—not just a paper company.

Minimum substance requirements

You must have:

• A physical office or flexi desk
• Employees if required by the nature of your business
• Core income-generating activities carried out inside the Free Zone

Why substance matters

Substance proves your business is truly operating in the UAE and not just “renting” a tax benefit.

3. Your Income Must Come Mostly From Qualifying Activities

The UAE looks at:

• Where your clients are based
• Where the services are delivered
• The type of business activity

Examples of businesses that easily qualify

• Online consultants
• Agencies
• SaaS and digital products
• Global e-commerce
• Holding companies
• IT services
• Remote service providers

High-risk example

A Free Zone business serving mostly mainland UAE clients may lose QFZP status.

4. Your Non-Qualifying Income Must Stay Below the De Minimis Threshold

The UAE uses a “small tolerance limit.”

What is de minimis?

Your non-qualifying income must stay:

• Below 5% of total revenue
  OR
• Below AED 5 million
  (whichever is lower)

If you exceed this threshold?
You risk losing the 0% tax benefit.

5. You Must Follow Corporate Tax Compliance Rules

Compliance requirements

• Corporate tax registration
• Filing an annual corporate tax return
• Maintaining proper accounting records
• Transfer pricing documentation (if applicable)

Penalties

Missing compliance obligations = fines + potential loss of QFZP status.

6. You Must Maintain Proper Accounting Books

This includes:

• Monthly bookkeeping
• Bank reconciliations
• Profit and loss statements
• Balance sheets
• Proof of substance
• Segregation of qualifying vs non-qualifying income streams

If your books are messy, you risk losing the tax benefit.

Is Ajman Free Zone a Qualifying Free Zone?

Short answer: Yes.

Ajman Free Zone is recognized by UAE tax authorities, and businesses registered there can qualify for 0% corporate tax if they meet all QFZP criteria.

Many clients choose Ajman Free Zone because:

• It is affordable
• Fast to set up
• Easy to maintain
• Suitable for consultants, online businesses, freelancers, and holding structures

How to Maintain QFZP Status Year After Year

Here’s what you need to check every year.

Annual Compliance Checklist

Free Zone Requirements

• License renewed
• Ejari / lease active
• Office or desk maintained

Corporate Tax Requirements

• CT registration complete
• Tax return submitted
• Transfer pricing docs updated

Accounting

• Books updated monthly
• Income properly categorized
• Expenses documented

Business Activity

• Majority of revenue from qualifying clients
• Mainland revenue within limits

Failing any of these puts QFZP status at risk.

How Roddick Helps You Stay Compliant and Tax-Free

Roddick provides full support for entrepreneurs who want the 0% tax benefit safely and legally.

We handle everything

• Free Zone company setup
• Corporate tax registration
• Monthly bookkeeping
• Compliance monitoring
• Advising on qualifying vs non-qualifying revenue
• Structuring your offers to stay tax-optimized

Our philosophy: Transparency before transaction

No hidden fees, no unclear terms, no surprises.

Should You Structure Your Company to Be a QFZP?

If you are:

• a consultant
• agency owner
• remote worker
• SaaS founder
• holding company
• freelancer
• global entrepreneur
• online service provider

Then yes. QFZP status is the most tax-efficient structure available in the UAE.

Final Thoughts: Staying at 0% Corporate Tax Is Simple, When Done Right

The UAE provides one of the most founder-friendly tax systems in the world, but maintaining QFZP status requires proper structure and ongoing compliance.

Roddick makes the entire process simple, transparent, and stress-free.

If you want help choosing the right free zone, meeting QFZP requirements, and protecting your tax benefits:

Book a free consultation at Roddick.biz

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