Who Needs QFZP Working Papers

A licence does not prove QFZP status

A free-zone licence tells you where the entity is established. It does not, by itself, prove that the entity is a Qualifying Free Zone Person. The Federal Tax Authority's QFZP FAQ identifies the real conditions: adequate substance in the UAE, Qualifying Income, transfer pricing compliance and no election to be taxed under the full Corporate Tax regime. The working paper should test each condition against the business as it actually operated.

If you are deciding whether to show QFZP treatment on the return, start with the contracts, revenue ledger and people who performed the work. We would not mark the status from the licence alone, because the return depends on the activities and records behind that licence. Cabinet Decision No. 100 of 2023 makes the income categories and the substance test part of the analysis, so the conclusion belongs in the file before the tax computation.

• Confirm the legal entity and Free Zone registration document.
• Map the activity that produced each material revenue stream.
• Test substance through premises, assets, staff and expenditure records.
• Record the QFZP conclusion before preparing the return.

Four tests, four objects in the file

The useful question is not whether the company has many documents. It is whether a reviewer can see the object that makes each conclusion true. A lease supports the place where work happens. Payroll and staff records support the people carrying out core income-generating activities. Contracts, invoices and customer records support the income classification. The transfer pricing file supports related-party terms.

Keep the conclusion beside the evidence rather than in a separate note that no one can trace. The FTA guide explains that core income-generating activities, assets, full-time employees and operating expenditure must match the activity being tested. A clean schedule therefore says what the document proves, what it does not prove and which line of the return uses the result.

The file is also useful when the answer is no. If the activity, substance or income test does not support QFZP treatment, record that conclusion with the same care. The owner then knows which Corporate Tax treatment the return team is using and which facts would need to change before a future period could be reviewed again. A clear negative conclusion is safer than a positive label that the evidence cannot carry.

• A licence proves registration, not the whole tax position.
• A customer contract should identify the activity and beneficiary.
• A payroll record should connect staff to the work performed.
• A transfer pricing schedule should explain related-party charges.

The file follows the income you want to protect

A manufacturer, logistics operator, treasury team or headquarter-services company needs a file that mirrors its own activity. A business with one qualifying stream may need a short revenue map and a direct-cost schedule. A group company with services, property, financing and branches needs separate treatment for each stream. The same licence can sit over very different facts, which is why a copied checklist is a weak starting point.

The evidence should also show who does not belong in the 0% analysis. Excluded Activities, revenue attributable to a Domestic Permanent Establishment and certain property income can move into the other Taxable Income component under Cabinet Decision No. 100 of 2023. Do not hide those lines because they make the spreadsheet less tidy. Identify them, explain the treatment and let the return reflect the facts.

• Separate manufacturing, services, financing and property streams.
• Flag Domestic Permanent Establishment revenue before the de minimis test.
• Mark Excluded Activities at transaction level where practical.
• Keep the same classification in the ledger and return schedule.

The de minimis calculation can change the answer

The FTA's Free Zone Persons guide gives a useful worked example. Company E had AED 7,000,000 of relevant total Revenue and AED 200,000 of non-qualifying Revenue after AED 300,000 attributable to its Domestic Permanent Establishment was left out. The arithmetic is AED 200,000 divided by AED 7,000,000, or 2.86%. That is below 5% and below the AED 5,000,000 amount, so the example meets the de minimis requirement, subject to the other QFZP conditions.

The point is not to copy Company E's result. It is to show the objects behind your own result: the revenue ledger, the Domestic Permanent Establishment schedule, the excluded-activity list and the calculation page. The FTA guide confirms the route but does not prescribe one universal document list for every QFZP activity. That boundary is genuine. A distributor, manufacturer and service company will need evidence suited to its operations.

• Start with the full revenue ledger for the Tax Period.
• Remove only amounts the Cabinet Decision allows you to disregard.
• Show the non-qualifying amount, denominator and percentage.
• Recheck the conclusion if a classification changes.

Sign the conclusion your return relies on

Once the conditions are tested, prepare a short conclusion that names the entity, Tax Period, qualifying activities, excluded lines, substance evidence and transfer pricing position. Attach the final trial balance, revenue bridge, cost schedule and audited financial statements. Ministerial Decision No. 84 of 2025 requires a QFZP to prepare and maintain audited financial statements, but the audit report does not replace the explanation of how the tax split was calculated.

If your return is already being prepared, do not wait for a reviewer to discover that the status memo is missing. Put the evidence index and open-items list in front of the person approving the filing. Exiloz can prepare the schedules and reconciliation from the records you hold. An independent auditor remains responsible for statutory audit work.

• Tie the conclusion to the signed financial statements.
• Keep unresolved classifications on an open-items list.
• Give each material line a source document and ledger reference.
• Obtain management approval before the return is submitted.