Defines the income of a Qualifying Free Zone Person that is taxed at 0%: dealings with other free zone persons, non-excluded activities with others, and qualifying intellectual property income, subject to a de minimis test and substance conditions; replaces Cabinet Decision No. 55 of 2023 with effect from 1 June 2023.
Cabinet Decision No. 100 of 2023 defines the Qualifying Income that a Qualifying Free Zone Person may tax at 0% under Article 18 of the Corporate Tax Law, Federal Decree-Law No. 47 of 2022. It was issued on 25 October 2023, repealed Cabinet Decision No. 55 of 2023 (Article 10) and took effect retroactively on 1 June 2023 (Article 11), the start date of corporate tax, so the earlier decision never governed a completed tax period. Article 2 confines it to Qualifying Free Zone Persons; it is in force, and the percentages, amounts and activity lists it refers to are fixed by ministerial decision, currently Ministerial Decision No. 229 of 2025.
Article 3 lists four categories of Qualifying Income: income from transactions with other Free Zone Persons, other than from Excluded Activities; income from transactions with non-Free Zone Persons, but only in respect of Qualifying Activities that are not Excluded Activities; income from Qualifying Intellectual Property calculated under Article 7; and any other income where the de minimis requirements in Article 4 are met. Income attributable to a permanent establishment or to immovable property in a Free Zone that is taxable under Article 6 is outside the category. A transaction counts as one with a Free Zone Person only where that person is the Beneficial Recipient, meaning it has the right to use and enjoy the service or good and no obligation to pass it to someone else.
Article 4 sets the de minimis test: non-qualifying revenue in a tax period must not exceed the lower of a percentage of total revenue and an absolute amount, both specified by the Minister. Revenue from a permanent establishment, from immovable property taxable under Article 6 and from non-qualifying intellectual property is left out of the calculation. Article 5 makes income attributable to a domestic or foreign permanent establishment Taxable Income at the standard rate, calculated as if the establishment were a separate related person; a Domestic Permanent Establishment is any presence outside the Free Zone but within the UAE. Article 6 taxes income from Free Zone immovable property where it arises from transactions with non-Free Zone Persons over commercial property, or with any person over non-commercial property such as residential units.
Article 7 confines the 0% rate on intellectual property to Qualifying Intellectual Property, meaning patents, copyrighted software and similar protected rights but not trademarks or other marketing intangibles, with the qualifying amount computed under a ministerial decision; the remainder is Taxable Income. Article 8 requires adequate substance: the core income-generating activities must be carried out in a Free Zone or Designated Zone with adequate assets, an adequate number of qualified full-time employees and adequate operating expenditure, with outsourcing allowed within a Free Zone or Designated Zone under adequate supervision, and for intellectual property to any person in the UAE or an unrelated person abroad.
Qualifying Free Zone Persons, meaning juridical persons incorporated or registered in a UAE Free Zone or Designated Zone that elect the 0% regime under Article 18 of the Corporate Tax Law, together with the Free Zone and non-Free Zone counterparties whose status determines whether income qualifies. Natural persons, mainland companies and Free Zone companies that elect the standard regime are outside it.
| Article 1 | Defines a Domestic Permanent Establishment as a place of business or other presence of a Qualifying Free Zone Person outside the Free Zone but within the UAE, Qualifying and Excluded Activities as those specified by the Minister, Qualifying Intellectual Property as patents, copyrighted software and similar rights excluding trademarks, and Commercial Property as immovable property used exclusively for business including hotels and serviced apartments. |
| Article 2 | The Decision applies to Qualifying Free Zone Persons. |
| Article 3(1) | Qualifying Income is income from transactions with Free Zone Persons other than Excluded Activities, income from Qualifying Activities with non-Free Zone Persons that are not Excluded Activities, Qualifying Intellectual Property income under Article 7, and other income where the de minimis requirements are met, excluding permanent establishment and taxable immovable property income. |
| Article 3(2)–(3) | Income is treated as derived from a transaction with a Free Zone Person only where that person is the Beneficial Recipient: the person with the right to use and enjoy the service or good and no contractual or legal obligation to supply it to another person. |
| Article 4 | The de minimis requirements are met where non-qualifying revenue in a tax period does not exceed the lower of a percentage of total revenue and an amount, both set by the Minister; permanent establishment, taxable immovable property and non-qualifying intellectual property revenue are excluded from the calculation. |
| Article 5 | Income attributable to a Domestic or Foreign Permanent Establishment is Taxable Income at the standard rate, calculated as if the permanent establishment were a separate and related person. |
| Article 6 | Income from immovable property in a Free Zone is Taxable Income where it arises from transactions with non-Free Zone Persons over Commercial Property, or from transactions with any person over property that is not Commercial Property. |
| Article 7 | Qualifying Income from Qualifying Intellectual Property is calculated under a ministerial decision; income from other intellectual property and any excess over the calculated amount is Taxable Income. |
| Article 8 | A Qualifying Free Zone Person must carry out its core income-generating activities in a Free Zone or Designated Zone with adequate assets, qualified full-time employees and operating expenditure; outsourcing is permitted within a Free Zone or Designated Zone under adequate supervision, and for intellectual property to persons in the UAE or unrelated persons abroad. |
| Articles 10–11 | Repeals Cabinet Decision No. 55 of 2023; the Decision was published in the Official Gazette and came into effect on 1 June 2023. |
The Decision contains no penalty provision. The consequence of failing its tests is loss of Qualifying Free Zone Person status under Article 18 of the Corporate Tax Law, so that all income is taxed at 9% above the AED 375,000 threshold, while filing and record-keeping failures are penalised under Cabinet Decision No. 75 of 2023.
Our free zone clients in RAKEZ, DMCC, IFZA, Meydan and the other zones ask one question at formation: will the company pay 0% or 9%? This Decision, read with the ministerial activity list, is how we answer it, and we test the business model against it before choosing the zone and the licence activities. The traps we see most are the Beneficial Recipient rule in Article 3, which stops a Free Zone trading company from counting sales to a Free Zone distributor that resells onshore, the de minimis cap in Article 4, which a single large mainland contract can breach, and Article 5, which turns a Dubai mainland office or sales team into a permanent establishment taxed at 9%. Where a client holds software or patents in a free zone company we document the Article 7 nexus and keep the Article 8 substance file of staff, premises and expenditure that the FTA expects to see at audit.
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