10 October 2026 · Eligibility
Who Needs QFZP Working Papers
The Federal Tax Authority treats a Qualifying Free Zone Person as a Free Zone Person that satisfies the statutory conditions for QFZP treatment. A licence alone does not prove that position. The file is for the business that must connect its activities, revenue, expenses, substance, financial statements and tax treatment to the conditions it relies on.
Exiloz Management & Tax Consultant · Dubai-based FTA-focused advisory · VAT, corporate tax & accounting
The licence is only the starting point
Start with Article 18 of Federal Decree-Law No. 47 of 2022. The statute does not define QFZP status by the name on a licence. A QFZP is a Free Zone Person that maintains actual and sufficient existence in the UAE, derives Qualifying Income, has not elected into Corporate Tax under Article 19, complies with the transfer-pricing and record rules, and satisfies conditions prescribed by the Minister. The working paper is where each condition becomes a finding.
A Free Zone Person is the juridical person registered in a Free Zone, including a branch registered there. A UAE company can therefore have a Free Zone branch and an operation outside the zone. The FTA's Free Zone Persons guide separates the Free Zone parent from the outside activity. A licence review that stops at the trade name misses the entity's legal form and the way the business actually earns revenue.
That distinction decides what the reader does next. Pull the licence, constitutional documents, tax registration record, latest financial statements and a complete activity list into one file. Then write a yes or no conclusion for every Article 18 condition. If one is not evidenced, do not present the entity as a clean QFZP. The cost of a casual answer is a return built on a rate the records cannot defend.
Test the activity, not the licence wording
Qualifying income is tested by transaction, not by a broad licence category. Cabinet Decision No. 100 of 2023 sets the income framework, while Ministerial Decision No. 229 of 2025 sets the current qualifying and excluded activities. The newer decision replaced Ministerial Decision No. 265 of 2023. That change matters when an older checklist still uses the former activity descriptions.
Build a revenue register with one row for each material stream. Record the customer, the person that receives and uses the goods or services, the activity performed, the contract, invoice range and the place where the work happened. A group customer is not automatically a Beneficial Recipient. A service described as consulting is not automatically a Qualifying Activity.
The failure seen in practice is a licence-led conclusion. The company sees a permitted activity on its certificate, copies that label into the tax file and never tests the contract or delivery model. Our recommendation is blunt: start with the invoice population and work backward to the licence. That produces a usable answer when the activity contains both qualifying and excluded elements.
Substance and records decide the claim
Substance is an operating question. The FTA guide says the Free Zone Person must perform its core income-generating activities in the Free Zone with adequate assets, full-time employees and operating expenditure. Outsourcing can work where the entity supervises the outsourced activity. A desk, mailbox or renewal receipt does not explain who performs the work or where decisions and resources sit.
Ministerial Decision No. 84 of 2025 adds a direct records obligation: every QFZP must prepare and maintain audited financial statements. The AED 50,000,000 revenue threshold applies separately to a Taxable Person that is not a Tax Group. It is not a safe harbour for a QFZP below that amount. Article 34 transfer-pricing rules and the record requirements also need a visible trail.
Use an evidence matrix before the return is drafted. For substance, attach premises, employee and operating-cost evidence. For transfer pricing, attach agreements, pricing work and ledger entries. For the audit condition, preserve the signed statements and report. The conclusion should name the document that supports it, not just repeat the condition in different words.
| Condition | Evidence to test | Failure exposure |
|---|---|---|
| Actual and sufficient existence | Free Zone premises, people and operating activity | QFZP status is unsupported |
| Qualifying Income | Revenue map, contracts, invoices and activity analysis | Income may move to standard treatment |
| No election into full Corporate Tax | Tax election review and management confirmation | The 0% route may not apply |
| Audited statements and transfer-pricing records | Signed statements, related-party schedule and method support | The return cannot be tied to its claims |
The de minimis test can change four years
Ministerial Decision No. 229 of 2025 gives the de minimis test a hard outer edge. Non-qualifying Revenue must not exceed the lower of 5% of total Revenue for the Tax Period or AED 5,000,000. Before calculating that percentage, the working paper must separate revenue attributable to a Domestic Permanent Establishment and other amounts the rules disregard.
The FTA's published Example 6 makes the denominator practical. It excludes AED 10,000,000 attributable to a Domestic Permanent Establishment and AED 2,500,000 of Free Zone immovable property, leaving total Revenue of AED 7,000,000 for the test. Non-qualifying Revenue is AED 200,000. The calculation is AED 200,000 / AED 7,000,000 = 2.86%, below 5% and AED 5,000,000, subject to the other conditions.
If a condition is missed, Ministerial Decision No. 229 of 2025 says the entity ceases to be a QFZP from the beginning of the relevant Tax Period and for the subsequent four Tax Periods. The FTA guide explains that standard Corporate Tax rules and rates then apply. A 0% calculation can become a 9% calculation, so the working-paper review is a tax decision, not a filing formality.
Close the exceptions before the return
Make the eligibility call in this order. Confirm the juridical person and Free Zone registration. Map the actual activities and beneficiaries. Test substance, transfer pricing, the election position and audited statements. Then calculate de minimis using the same revenue population that feeds the return. Give management a short exception list before anyone locks the tax computation.
One boundary is genuinely unsettled at the first review: a hybrid activity can sit between a qualifying description and an excluded result, and the FTA guide does not settle that question from a licence code alone. The answer depends on contracts, conduct, customer use and supporting records. Mark that judgment as open, assign an owner and do not hide it under a generic revenue category.
The deliverable should be a signed conclusion, revenue register, substance file, related-party schedule, de minimis calculation and audit tie-out. Exiloz can organise those schedules for management review. It is not a registered Tax Agent and does not perform statutory audits. If the evidence cannot support the status, the file should say so before the return is submitted.
Related guides
Frequently Asked Questions
For deciding whether your file is ready.
Does a free-zone licence make a company a QFZP?
No. The Federal Tax Authority treats QFZP status as conditional. The business must satisfy the Corporate Tax requirements for substance, qualifying income, elections, records and any other prescribed conditions. A licence is one fact in the analysis, not proof of the full position.
Who should prepare the working papers?
The Federal Tax Authority's Free Zone Persons guide supports a file built from the business records. Finance can prepare it, but the owner and management must confirm the activities, customers, costs and evidence behind each classification before the return is submitted.
What should the eligibility file show?
The Federal Tax Authority expects the file to make the tax treatment traceable. Show the entity status, activities, revenue streams, expense treatment, substance evidence, financial-statement tie-out and the records supporting the QFZP conclusion for each material position.
Can Exiloz test the QFZP position?
Yes. Exiloz can test the position against the Federal Tax Authority's published Free Zone Persons guidance, map the evidence gaps and prepare a working-paper file for management and the filing team before filing, with clear next steps.
Does your status hold?
Exiloz tests your QFZP position and builds the evidence trail behind the return.