My free zone company earns IP income — how is the qualifying portion calculated?

If your free zone company earns income from an IP asset (a patent, software copyright, and similar), the FTA doesn't automatically apply the 0% rate to all of it. UAE Corporate Tax follows the internationally recognized "nexus approach": you calculate a ratio of (qualifying expenditure + an uplift of up to 30% of that qualifying expenditure) divided by overall expenditure linked to developing the asset, capped at 100%.

Qualifying expenditure is what you actually spent on R&D yourself or through an unrelated party — R&D staff salaries, direct materials, related operating costs. Costs excluded from "qualifying" — like the price of acquiring the IP asset itself, interest, or building costs — still count in "overall expenditure" and pull the ratio down. That ratio is then applied to total IP income to arrive at the qualifying income eligible for 0%; the rest is taxed at the standard 9%. RASEEKH helps you track and document expenditure correctly from day one, since a weak tracking system can turn otherwise qualifying income into fully taxable income.