How to Benefit from Tax Exemptions in Free Zones (QFZP):
Free zones in the UAE offer significant advantages to businesses, including a 0% corporate tax rate on qualifying income. To benefit from these exemptions and qualify as a “Qualified Free Zone Person” (QFZP), companies must meet specific conditions. Below is a detailed guide on the requirements and benefits.
Basic Conditions to Qualify as a QFZP
- Not elected to be subject to Corporate Tax at 9%
Companies must opt out of being taxed at the 9% corporate tax rate to maintain QFZP status. - Derive Qualifying Income
Generate qualifying income from activities within the free zone or with clients outside the UAE. - Maintain adequate substance in Free Zone or Designated Zone (in case of distribution)
Ensure sufficient operational and physical presence within the free zone, including offices, employees, and assets. - Maintain audited Financial Statements regardless of the amount of Revenue
Submit audited financial statements prepared by an accredited entity. - Comply with transfer pricing provisions and maintain relevant documentation
Adhere to transfer pricing regulations and keep appropriate records to demonstrate compliance. - Meet de minimis requirements
Ensure that non-qualifying revenue does not exceed the lower of:- AED 5,000,000, or
- 5% of total revenue.
Benefits of QFZP Status
- Tax Exemptions
Benefit from a 0% corporate tax rate on qualifying income. - Access to Advanced Business Infrastructure
Leverage modern facilities and logistics in free zones. - Enhanced Investment Opportunities
Increased attractiveness to foreign investors due to favorable tax conditions. - Seamless Access to Global Markets
Proximity to major ports and airports facilitates international trade.
Steps to Ensure Compliance
- Conduct Regular Assessments
Evaluate financial and operational performance to maintain compliance. - Maintain Accurate Documentation
Keep updated legal and financial records to demonstrate adherence to regulations. - Seek Professional Guidance
Consult with tax advisors to ensure your company fulfills all requirements.
How We Can Help
At the International Consultancy & Auditing Center, we offer tailored solutions to help businesses achieve QFZP status. Our team will guide you through every step, ensuring compliance with tax laws and maximizing the benefits of free zone incentives.
Contact us today for a free consultation and unlock your company’s potential in the UAE’s thriving free zones.
Get in touch today and let us help you secure the benefits of being a Qualified Free Zone Person.
Frequently Asked Questions (FAQs)
What are the conditions to qualify as a QFZP?
Companies must meet criteria such as maintaining audited financial statements, adhering to transfer pricing rules, and ensuring adequate substance in the free zone.
Are audited financial statements mandatory?
Yes, companies must provide audited financial statements, regardless of revenue amounts.
What is the de minimis requirement?
Non-qualifying revenue must not exceed the lower of AED 5,000,000 or 5% of total revenue.
How can I ensure compliance with QFZP requirements?
Regular assessments, maintaining accurate documentation, and consulting with experts can help ensure compliance.
How can the International Consultancy & Auditing Center assist me?
We offer comprehensive support in achieving QFZP status, including tax advisory and compliance services.
