Adequate Substance — what actually needs to physically exist in your Free Zone to keep the 0% rate?

For your company to keep its status as a Qualifying Free Zone Person and benefit from the 0% rate, it's not enough for your activity to fall under Qualifying Activities — you also need genuine 'Adequate Substance' actually present inside the free zone, not just a registered address on paper.

The first element: your Core Income-Generating Activities (CIGA) need to actually take place inside the free zone, not somewhere else. If your activity is manufacturing, the actual production line and operations need to be inside the zone — not just an administrative office.

The second element: adequate assets — office space, a factory, or equipment appropriate to the scale of your activity. The third: a sufficient number of qualified employees who are actually carrying out the activity, not just names on paper. The fourth: adequate operating expenditure actually incurred inside the free zone — rent, salaries, utilities — proportionate to the scale of the activity. These four elements are interconnected, and there's no single fixed number that fits every business — adequacy is measured relative to your specific activity's size and nature.

One important point: you don't have to do everything yourself — you can outsource part of these activities to a third party inside the same free zone, as long as you retain a genuine level of supervision and oversight over what's being done, rather than delegating and forgetting about it.

RASEEKH can run a quick review of your current position — assets, employees, and expenditure — and give you a plain picture of what's solid and what needs addressing, so you can keep benefiting from the 0% rate with confidence.