Definition

Qualifying Income refers to the portion of a Free Zone company’s income that is eligible for the 0% Corporate Tax rate under UAE Corporate Tax Law. Only income meeting specific conditions set by the Federal Tax Authority (FTA) qualifies for this relief.

Key points

• Earned from transactions with other Free Zone entities or exports to foreign customers.
• Income from mainland UAE may only qualify if subject to withholding tax or within FTA guidelines.
• Must maintain adequate substance and comply with transfer pricing rules.
• Non-qualifying income is taxed at the standard 9% rate.

Practical example

A Free Zone logistics firm earns AED 5 million from international clients — this qualifies for 0% Corporate Tax. Income from mainland UAE clients is taxed at 9%.

Why it matters

Determining qualifying income correctly ensures Free Zone companies retain their 0% tax status and avoid penalties.