Key takeaways
- The Ministry of Finance clarification on qualifying income for free zone companies matters most to service firms with mainland clients.
- Exceeding the de minimis allowance puts all taxable income under the standard regime and removes QFZP status for that period and the next four.
- Dividend treatment turns on the holding, under the qualifying activity list and the participation rules.
Why income decides the 0% rate
A Qualifying Free Zone Person pays 0% corporate tax on qualifying income and 9% on everything else, so the benefit depends on what counts as qualifying income.
The 2025 rules leave the law itself unchanged. They settle two points that some companies had read in their favour: service income billed to the mainland is usually non-qualifying, and dividend income is categorised more sharply.
Breaching the de minimis limit
The regime tolerates a limited amount of non-qualifying revenue before a company drops out of 0% entirely. That de minimis allowance is 5% of revenue or AED 5 million, whichever is lower.
Cross it and the standard regime applies to all your taxable income, not only the mainland portion, and QFZP status is lost for that period and the next four.
What counts as free zone qualifying income
Each one decides whether a revenue stream sits inside your 0% rate.
Mainland service invoices
Consultancy, marketing and IT services are not on the qualifying activity list, so that revenue billed to mainland clients is not eligible for 0%.
A services firm bills straight from its licence, so non-qualifying income can build up unnoticed.
Most exposed: free zone service businessesHow dividends are categorised
Holding shares for investment is a listed qualifying activity, and qualifying dividends can also be exempt under the participation rules.
Treating dividends as ordinary non-qualifying revenue can use up the de minimis allowance and create a breach that does not exist.
Most exposed: holding structuresIs your 0% rate worth testing?
The companies most exposed have never measured their mainland income against the limit.
None of this means dropping mainland clients. It means knowing what proportion of income they represent as it accrues through the year, with the basis documented, because proving qualifying income is the taxpayer's burden.
A DET branch licence or temporary permit now lets most Dubai free zone companies operate on the mainland. That answers the licensing question only; the income still has to pass the tax test.
Your QFZP position needs checking all year, beyond the return where you claim it.
We map each revenue stream to qualifying or non-qualifying. If the position is comfortable, we say so; if not, you hear while there is time to act.
