Turning QFZP uncertainty into a documented Corporate Tax position
A regulated UAE Free Zone financial-services business with annual revenue exceeding AED 12 million was approaching its first Corporate Tax return for its 2024 Tax Period after receiving differing assessments of whether it met the conditions for Qualifying Free Zone Person (QFZP) treatment.
Haseeb & Partners took over the assessment, tested the position against the QFZP conditions applicable to the 2024 Tax Period, built the supporting compliance pack and prepared the Corporate Tax return on the basis of the resulting QFZP position.
Client context
The business operated from a UAE Free Zone and generated more than AED 12 million in annual revenue from regulated financial-services activities, with relevant income streams requiring assessment under the 2024 QFZP rules. Its first Corporate Tax return for its 2024 Tax Period created a new question for management: whether the business could support a QFZP position under the UAE Corporate Tax regime.
Previous assessments had reached different conclusions. Rather than relying on a standalone opinion, management needed a condition-by-condition review tied to the company's actual activities, income, substance, Related Party arrangements and financial records.
The challenge
The issue was not simply whether the company was located in a Free Zone. The filing position needed to be supported by evidence that the relevant QFZP conditions were met for the Tax Period.
- Whether the business activities and income streams supported Qualifying Income treatment
- Whether any non-qualifying revenue remained within the applicable de minimis limit
- Whether the business performed its core income-generating activities in the Free Zone with adequate substance
- Whether Related Party transactions and Transfer Pricing requirements had been appropriately addressed
- Whether the tax analysis reconciled to the audited financial statements and underlying accounting records
- Whether the overall position could be supported through a complete and consistent compliance file before the return was submitted
Our approach
We reassessed the QFZP position from first principles rather than relying on the earlier assessments.
Qualifying Income and activity analysis
We reviewed the business model, regulated activities and revenue streams to determine how the income should be treated for QFZP purposes and whether the relevant activities supported the proposed Free Zone treatment.
De minimis testing
We analysed the revenue streams, identified any potentially non-qualifying amounts and completed the de minimis calculation against the applicable threshold. The calculation and underlying support were retained as part of the compliance pack.
CIGA and adequate substance
We documented the core income-generating activities performed by the business and assessed the substance supporting those activities, including where the key functions were performed and the adequacy of the assets, qualified personnel and operating expenditure supporting the Free Zone activities.
Related Parties and Transfer Pricing
We reviewed Related Party arrangements and the Transfer Pricing considerations relevant to the QFZP position, including the supporting analysis and documentation required for the transactions identified during the engagement.
Audited financial statements and tax computation
The QFZP assessment was reconciled to the audited financial statements and accounting records. We completed the Corporate Tax computation, supporting schedules and the adjustments required to connect the accounting results to the filing position.
QFZP compliance pack and return
We brought the analysis together into a structured QFZP compliance pack covering the calculations, evidence and supporting documentation behind the position. Based on the completed assessment, we prepared the company's first Corporate Tax return on the basis that the business met the QFZP conditions for its 2024 Tax Period.
A documented QFZP position, supported by the underlying financial records, calculations and compliance evidence, was reflected in the client's first Corporate Tax return for its 2024 Tax Period.
The business moved from conflicting assessments to a single, evidence-backed filing position. The return was supported by the QFZP analysis, de minimis testing, substance assessment, Related Party and Transfer Pricing review, audited financial statements and the wider compliance pack prepared through the engagement.
Ongoing monitoring
The engagement did not treat QFZP as a one-time filing label. We identified the conditions and data points management needs to continue monitoring so that changes in income, activities, substance or Related Party arrangements can be assessed during the year rather than only when the next Corporate Tax return becomes due.
What this engagement covered
QFZP assessment
Qualifying Income, de minimis testing and the applicable Free Zone conditions.
02CIGA and substance
Assessment and documentation of the core income-generating activities and supporting operational substance.
03Related Parties and Transfer Pricing
Review of Related Party arrangements and relevant Transfer Pricing compliance.
04Corporate Tax compliance
Tax computation, supporting schedules, compliance pack and Corporate Tax return preparation.
Need clarity on your Free Zone Corporate Tax position?
If your business is approaching its first Corporate Tax return, has received different views on QFZP eligibility, or needs stronger support for an existing Free Zone position, we can help assess the position and the evidence behind it.