How to use the calculator
- Enter the total revenue of the free zone person for the tax period.
- Enter the revenue the rules leave out of the test: revenue of a permanent establishment, certain free zone property and non-qualifying intellectual property. Leave it empty if there is none.
- Enter the non-qualifying revenue, not counting anything already left out. The result shows the limit, the share and the headroom as you type.
How the test is calculated
Revenue in the test = total revenue − revenue left out
Limit = the lower of 5% × revenue in the test, and AED 5,000,000
The test is met when non-qualifying revenue ≤ limit
Headroom = limit − non-qualifying revenue
The comparison is made to the fils, so non-qualifying revenue exactly at the limit passes. The AED 5,000,000 cap is the lower figure once revenue in the test is above AED 100,000,000.
The limit and the revenue left out
De minimis limit
Lower of AED 5,000,000 or 5% of total Revenue
To keep Qualifying Free Zone Person status, a Free Zone Person's non-qualifying Revenue in a Tax Period must not exceed the lower of AED 5,000,000 or 5% of its total Revenue.
- Applies to
- Qualifying Free Zone Persons, per Tax Period
- Source
- Free Zone Persons Corporate Tax Guide (CTGFZP1, May 2024), section 3.2.8, Federal Tax Authority
- Checked
Revenue left out of the test
Permanent Establishment, certain Free Zone Immovable Property and non-qualifying intellectual property Revenue left out of both sides
For the de minimis test, total Revenue and non-qualifying Revenue leave out Revenue attributable to a Foreign or Domestic Permanent Establishment, Revenue from Immovable Property in a Free Zone (other than Commercial Property transactions with Free Zone Persons), and Revenue from owning or exploiting intellectual property other than Qualifying Income from Qualifying Intellectual Property; income from these sources is taxed at 9%.
- Applies to
- Free Zone Persons applying the de minimis requirements, per Tax Period
- Source
- Free Zone Persons Corporate Tax Guide (CTGFZP1, May 2024), sections 4.4 and 4.4.1, Federal Tax Authority
- Checked
Non-qualifying revenue is revenue from excluded activities, from activities that are not qualifying activities where the customer is not a free zone person, and from transactions with a free zone person that is not the beneficial recipient of the goods or services.
What failing costs
5 Tax Periods (the failing period plus the next 4)
A Qualifying Free Zone Person that fails any condition at any time during a Tax Period stops being a QFZP from the start of that Tax Period and for the four following Tax Periods, five Tax Periods in all; an election into the standard rates has the same effect from the start of the Tax Period in which the election takes effect.
- Applies to
- Free Zone Persons that lose QFZP status
- Source
- Free Zone Persons Corporate Tax Guide (CTGFZP1, May 2024), section 3.4, Federal Tax Authority
- Checked
Worked examples from the FTA guide
Worked example
Example 5: AED 500,000 of non-qualifying revenue
The figures are those of example 5 in the FTA's free zone guide.
- Total revenue AED 19,800,000, of which AED 12,500,000 comes from a mainland (domestic) permanent establishment and from renting free zone property to persons that are not free zone persons.
- Revenue in the test: AED 19,800,000 − AED 12,500,000 = AED 7,300,000.
- Limit: the lower of 5% × AED 7,300,000 = AED 365,000 and AED 5,000,000, so AED 365,000.
- Non-qualifying revenue of AED 500,000 is 6.85% of revenue in the test.
The test fails by AED 135,000.
Worked example
Example 6: AED 200,000 of non-qualifying revenue
The same company as in example 5, except that AED 300,000 of non-qualifying revenue belongs to its mainland permanent establishment.
- Revenue left out: AED 12,800,000. Revenue in the test: AED 7,000,000.
- Limit: 5% × AED 7,000,000 = AED 350,000, below AED 5,000,000.
- Non-qualifying revenue of AED 200,000 is 2.86% of revenue in the test.
The test is met, with AED 150,000 of headroom.
What the calculator assumes and leaves out
- The split of revenue is yours to make. Which revenue is qualifying, non-qualifying or left out depends on the activity, the customer and the free zone rules. The calculator only applies the test to the figures entered.
- The other conditions. Passing this test is one of several conditions. A qualifying free zone person also needs adequate substance in the free zone, qualifying income, audited financial statements and compliance with transfer pricing rules, and must not have elected the standard regime.
- One tax period at a time. The test is applied to each tax period on its own figures.
- No tax figure. The corporate tax calculator works out the tax with or without free zone status.
The free zone rates and conditions
0% on Qualifying Income; 9% on other Taxable Income
A Qualifying Free Zone Person pays Corporate Tax at 0% on its Qualifying Income and at 9% on Taxable Income that is not Qualifying Income, provided it keeps meeting all the conditions (adequate substance, Qualifying Income, no election into the standard regime, transfer pricing compliance, audited financial statements, de minimis test).
- Applies to
- Free Zone Persons that meet the conditions of Article 18 of the Corporate Tax Law
- Source
- Federal Decree-Law No. 47 of 2022 on the Taxation of Corporations and Businesses and its amendments (consolidated, unofficial translation, v13.1.26), Articles 3(2) and 18, Ministry of Finance
- Checked
Watch out
A failed test costs the regime for 5 tax periods, not one. The calculator works just as well with the figures of the year so far, to show the headroom left before the period closes.