GULF CONSULT Tax Team on October 18, 2026

QFZP Status in Practice: Common Disqualification Triggers and Planning for 2027

The ways free zone companies most often lose the 0% corporate tax rate, and the planning steps to protect QFZP status through 2027.

1 min read

Losing Qualifying Free Zone Person status costs five years at the regular 9% rate. With several returns now filed, the ways companies fail the conditions have become clear. Most are avoidable with monthly tracking rather than year-end review.

Common Disqualification Triggers

The failures we see most often:

Sales to individuals, which generally count as non-qualifying revenue and quickly use up the de minimis allowance
Mainland customers served directly for activities that are not qualifying activities
Thin substance: no staff or premises in the free zone for the core income-generating activities
Related-party pricing with no arm's-length support
No audited financial statements

The De Minimis Maths

Non-qualifying revenue must stay within 5% of total revenue or AED 5 million, whichever is lower. For a company with AED 10 million of revenue, that is only AED 500,000, a single large contract with the wrong customer.

Planning for 2027

Steps to take before the next tax year:

Tag every customer as free zone, mainland business or individual in your accounting system
Report non-qualifying revenue monthly against the de minimis ceiling
Move mainland or retail activity into a separate mainland entity where needed
Document substance and transfer pricing as the year goes on
Distributors: plan the AUP report required by FTA Decision No. 6 of 2026

Frequently Asked Questions

What is the most common reason free zone companies lose QFZP status?

Non-qualifying revenue above the de minimis limit, often from sales to individuals or mainland customers.

Can a free zone company with mainland customers keep the 0% rate?

Sometimes. Revenue from qualifying activities can still qualify, and other mainland revenue must stay within the de minimis limit. Many groups use a separate mainland entity.

Sources

This article is general information, not advice for your situation. Rules change; check the current position or speak to an advisor before acting.

Need help with this? See our Corporate Tax Services.

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