TaxSavvyAE

Mainland clients and the 0% rate

Most of my free zone company's clients are mainland companies. Can I still get 0 percent?

The situation

Income from mainland persons is generally non-qualifying, unless it falls in specific qualifying activities or rules. If it is large, the de minimis test fails.

The law

  • Art 18, Federal Decree-Law 47 of 2022: Qualifying income condition
  • Cabinet Decision 100 of 2023: Income from non-free zone persons is generally not qualifying except as listed

What it means for you

Example: a zone consultancy with 80 percent of fees from mainland clients fails the de minimis test and loses the status. It is then taxed at 9 percent above AED 375,000 for that period and the next four. Such a business may be better off electing the standard rate or SBR from the start.

What to do

  1. Measure income from mainland clients.
  2. Check if any listed rule makes it qualifying.
  3. If not, do not claim QFZP status.
  4. Consider SBR or the standard regime.

We can do this for youQualifying Free Zone Person review and return: substance, qualifying income, de minimis test and audited accounts: AED 6,000

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