10 October 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
What must the QFZP pack prove?
A Free Zone licence does not by itself produce 0% Corporate Tax. A Free Zone Person must meet the conditions for QFZP status and then identify which income is qualifying. The working file should read Federal Decree-Law No. 47 of 2022 with Cabinet Decision No. 100 of 2023, Ministerial Decision No. 229 of 2025 and the FTA Free Zone Persons Guide CTGFZP1. The licence is the starting fact, not the conclusion.
The FTA says the conditions include adequate substance, qualifying income, transfer pricing compliance and no election to be subject to Corporate Tax in full. The accounts should therefore show more than a total revenue number. They should connect income to activities, customers, contracts and the people and assets used to earn it. A reviewer must be able to follow that connection without relying on a verbal explanation.
Getting the classification wrong can move income from the 0% qualifying-income treatment into the regular 9% Corporate Tax calculation and can leave the business with audit and evidence work it did not plan for. The cost is not only tax. It is the time spent reconstructing why each stream was placed in the schedule.
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 outside the Free Zone or has shared staff and premises. Each fact can change the classification or the evidence needed. The first review should list those facts beside the revenue streams.
Do not label an income stream qualifying because the invoice carries a free-zone address. Read the licence, contract, customer status and service description first, because the FTA guide tests the transaction and activity rather than the colour of the letterhead. Put the decision beside the source documents so management can approve the position it is taking.
Ministerial Decision No. 229 of 2025 replaced Ministerial Decision No. 265 of 2023 as the current instrument for qualifying and excluded activities. Do not copy an old activity list into the year-end schedule. Check the current decision, then record which activity supports each revenue stream and which exception needs separate treatment.
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 line moved between categories. The file should show the source, decision and calculation together.
The table is useful because a QFZP file has several evidence questions. A contract can show what was sold. A customer record can support the recipient facts. Customs or operating records can show where the activity happened. A transfer-pricing working can explain a related-party result. None of those documents replaces the others.
Ministerial Decision No. 84 of 2025 requires every QFZP to prepare and maintain audited financial statements, regardless of revenue. Exiloz can prepare the accounting pack and audit support, but it does not perform the statutory audit or issue an audit opinion. The close file should make that handover clear rather than calling preparation an audit.
| Question | Document | What the file should show |
|---|---|---|
| What was supplied? | Contract, invoice and delivery or service record | Transaction and activity described |
| Who received it? | Customer status and ownership records | Recipient facts and beneficial use |
| Where did it happen? | Operating, branch and customs records | Free Zone or other establishment link |
| How was profit assigned? | Cost allocation and transfer-pricing working | 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.
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 says the AED 2,000,000 is not treated as non-qualifying Revenue for that calculation. Keep that distinction visible.
For other non-qualifying Revenue, the guide sets the de minimis limit at the lower of 5% of total Revenue or AED 5,000,000. Prepare that calculation from the classified schedule, then prepare the tax bridge, evidence index and management questions. For related parties, keep the agreement, invoice, pricing working and approval together.
The guide has a boundary, and 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 guide says more. Keep the unresolved interpretation visible for the return reviewer.
The cost 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 business needs audited financial statements or a separate evidence index. Those are specific tasks. They are more useful in a quote than a promise that the classification will be simple.
Ask today whether the file can prove the classification without a verbal explanation from the owner. If not, start with the contracts and revenue ledger. Reconcile that map to the general ledger, record the exceptions, and send the finished schedule with the working papers to the person preparing the return.
Related guides
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.