26 August 2026 · Free Zone
What a QFZP Close Needs to Show
A QFZP year-end pack should keep qualifying and non-qualifying income distinguishable, link revenue to the relevant activity, explain shared costs and preserve the records supporting the classification. The Federal Tax Authority's QFZP compliance guidance is the authority for current filing and evidence requirements. The pack supports the return; it does not create Qualifying Free Zone Person status.
Exiloz Management & Tax Consultant · Dubai-based FTA-focused advisory · VAT, corporate tax & accounting
A QFZP pack must show why each income stream qualifies
A QFZP year-end accounts pack should let a reviewer move from the trial balance to each income stream, the customer, the activity and the evidence supporting its treatment. The Federal Tax Authority Free Zone Persons Guide describes 0% Corporate Tax on Qualifying Income and 9% on Taxable Income that is not Qualifying Income. The pack must show that split instead of presenting one undifferentiated revenue total.
The same guide requires a Free Zone Person to prepare and maintain audited Financial Statements regardless of the amount of Revenue it earns. That does not mean the accounting file can stop at an income schedule. It needs the contracts, invoices, customer status, activity analysis, related-party workings and cost allocations that explain how the numbers were classified.
The goal is a file another person can test from the ledger to the source record. A free-zone licence is an input to the analysis, not proof that every sale earns the 0% rate. The contract, customer and activity evidence still have to support the treatment recorded in the tax working papers. Keep the unresolved questions visible so a reviewer can see what management still has to decide before the tax handover. Keep that decision visible in the final evidence index.
Separate the business facts from the tax label
This pack is for a Free Zone Person that wants to support its QFZP position through the accounts and return working papers. It is especially important where the company sells to both Free Zone and non-Free Zone customers, performs more than one activity, operates a branch outside the Free Zone or has shared staff and premises. Each fact can change the classification or the evidence needed.
We would not label an income stream qualifying because the invoice carries a free-zone address. We would first read the licence, contract, customer status and service description, because the FTA guide tests the transaction and the activity rather than the colour of the letterhead. The decision belongs beside the source documents so management can approve the position it is taking.
If the company distributes goods or materials in or from a Designated Zone, read FTA Decision No. 6 of 2026 as well. It adds procedures for that activity, including an agreed-upon procedures report from an independent external auditor and evidence about reseller customers and Designated Zone imports.
Make the classification traceable in four directions
Start with revenue by customer and contract, then map each line to the activity performed and the place where the work or supply occurred. Next, reconcile the classification schedules to the general ledger. Finally, tie shared costs to a written allocation method and keep the calculation with the schedule. A reviewer should not have to infer why a cost or income line moved between categories.
The table is useful because a QFZP file has several different evidence questions. A contract can show what was sold. A customer licence can support reseller status. Customs records can show the route of imported goods. A transfer-pricing working can explain the result for a related party. None of those documents replaces the others.
For related-party transactions, keep the agreement, invoice, pricing working and approval together. The FTA guide refers to the arm's length principle and transfer pricing documentation. If the threshold for a master file, local file or disclosure form is met, the tax preparer needs a clear handover rather than a note saying related parties reviewed.
| Question | Document | What the file should show |
|---|---|---|
| What was supplied? | Contract, invoice and delivery or service record | The transaction and activity described |
| Who received it? | Customer licence and ownership details | Customer status and beneficial recipient facts |
| Where did it happen? | Customs, branch and operating records | Free Zone, Designated Zone or establishment link |
| How was profit assigned? | Cost allocation and transfer-pricing working | The reason for the amount recorded |
Build the pack from the ledger outward
Freeze the revenue and expense extracts for the Tax Period, then match the largest and most unusual balances to contracts and source records. Mark income from excluded activities, immovable property, foreign establishments and domestic establishments for separate review. Do not bury those lines inside a general qualifying-income schedule. The exception is the work that needs the clearest explanation.
Worked example from the FTA Free Zone Persons Guide. If total Revenue is AED 10,000,000 and AED 2,000,000 is attributable to a Domestic Permanent Establishment, the de minimis calculation uses AED 8,000,000 of total Revenue because AED 10,000,000 - AED 2,000,000 = AED 8,000,000. The guide also says the AED 2,000,000 is not treated as non-qualifying Revenue for that calculation. Keep that distinction visible in the schedule.
Then prepare the tax bridge, the evidence index and the questions for management. If FTA Decision No. 6 of 2026 applies, give the independent auditor the customer, sales and import records needed for the agreed-upon procedures. Exiloz can prepare the accounting pack and audit support, but it does not perform the statutory audit or issue that report.
The guide has a boundary, and your contracts fill it
The FTA Free Zone Persons Guide confirms the categories, conditions, rates and examples. It does not state how every mixed contract should be allocated when one document covers several activities, customers or locations. That edge remains unsettled until the actual contract, invoices, work records and customer facts are mapped. Record the judgement rather than pretending the document says more than it does.
The price of preparing this pack is driven by the number of revenue streams, customer records, related-party arrangements, branches, shared costs and missing documents. It also rises when the independent auditor needs an evidence index or an FTA Decision No. 6 report is in scope. Those are specific tasks. They are more useful in a quote than a promise that the service is easy.
At the decision point, ask today whether your file can prove the classification without a verbal explanation from the owner before sign-off. If not, start with the contracts and the revenue ledger. That pair usually shows which questions the rest of the pack has to answer.
Frequently Asked Questions
For separating free-zone income and support.
What should a QFZP year-end pack show?
It should distinguish qualifying and non-qualifying income, connect revenue to the relevant activity, explain shared-cost allocations and retain the records behind the classification. The Federal Tax Authority's Free Zone Persons guide is the authority for the conditions and evidence context. The accounts pack supports the analysis but does not grant QFZP status.
Why separate qualifying and other income?
Separate schedules let the preparer test the income classification and trace it back to contracts, invoices and ledger entries. The Federal Tax Authority's guidance on Free Zone Persons explains the QFZP framework. A single undifferentiated revenue balance makes that review harder and leaves the treatment less clear.
How should shared costs be handled?
Document the allocation method, apply it consistently and retain the records that explain the basis for the split. The Federal Tax Authority's QFZP guidance is the relevant authority for the wider tax treatment. The close pack should show the calculation and any judgement for review.
Can Exiloz confirm QFZP status?
Exiloz can review the accounts, income classification and supporting records against the published framework, then identify gaps for the business to resolve. The Federal Tax Authority determines the applicable tax position. Exiloz does not issue a government approval or certification of QFZP status.
Is your free-zone pack ready?
Exiloz separates the close schedules, tests the working papers and returns open questions before your QFZP filing work begins.