What actually counts as 'Qualifying Income' for your Free Zone company? A detailed list with examples

For your Free Zone company to benefit from the 0% tax rate, simply being registered as a Free Zone Person isn't enough — your income has to fall under one of the specific activities set out in Cabinet Decision No. 100 of 2023 and Ministerial Decision No. 265 of 2023, known as 'Qualifying Activities.' This list is precisely defined, not a general description like 'any business activity carried out inside a free zone.'

One of the clearest examples: manufacturing or processing goods or materials — a factory in a free zone that manufactures a product and sells it, whether to customers inside the UAE or abroad, has qualifying income from that activity. Also qualifying: distributing goods from a Designated Zone — a trading company that imports goods, stores them in a warehouse inside a specific designated free zone, and distributes them to customers without those goods directly entering the local market in a way that would break the condition.

Holding shares and securities for investment purposes qualifies too — a holding company in a free zone that owns stakes in other companies and earns dividends or returns from them has qualifying income. So do fund management and wealth management services provided by a licensed, regulated entity, and reinsurance services provided by a specialized company.

Headquarter services and treasury and financing services, when provided to related parties within the same group, also qualify — a free zone company providing centralized administrative or financing services to sister branches in other countries falls here. So does financing and leasing of aircraft (including engines and spare parts), and logistics services more broadly.

There's an important point to watch: some of these activities, when carried out with non-related parties or natural persons, are subject to a de minimis cap. If your income from non-qualifying activities exceeds a certain percentage of your total revenue, you can lose Qualifying Free Zone Person status entirely — not just on the excess portion. So it isn't enough for your core activity to qualify; you also need to continuously monitor the proportion of non-qualifying income.

This list doesn't cover every detail and exception, and each case differs depending on the activity type and who you're dealing with. At RASEEKH, we sit down with each client and review their actual activity line by line to determine exactly what falls under qualifying income and what doesn't.