One number decides whether your free zone company keeps its 0%

Take last year's revenue. Work out what share of it came from mainland UAE customers, or from customers outside the country. If that share crosses the lower of 5% of total revenue or AED 5 million, you are not a Qualifying Free Zone Person for that tax period.

Nor for the four that follow. Article 18 of Federal Decree-Law 47 of 2022 removes the status from the beginning of the period in which the breach happened and for the four after it. Five tax periods on a single year's arithmetic.

That is the part people underestimate. The allowance is the lower of the two figures, so the AED 5 million ceiling only matters to large companies. For a business turning over a million dirhams, the allowance is fifty thousand. One mainland retainer. One consulting project. A single invoice can do it.

What actually counts against you

Revenue is non qualifying when it neither comes from another Free Zone Person nor arises from an activity on the Qualifying Activities list. That list was rewritten by Ministerial Decision 229 of 2025, which repealed and replaced Ministerial Decision 265 of 2023 with retroactive effect from 1 June 2023.

Read the list and the omission is loud. Manufacturing is on it. Processing goods. Trading qualifying commodities. Distribution from a designated zone. Fund management, reinsurance, treasury services to related parties, ship operation.

Consultancy is not. Neither is advisory, accounting, marketing, recruitment, software sold to customers, or most professional services billed by the hour.

So a free zone consultancy invoicing a Dubai mainland client is generating non qualifying revenue, whatever its licence permits it to do. The licence tells you what you may sell. The Qualifying Activities list tells you what qualifies for 0%. They are different documents answering different questions, and treating them as one is the most common error we see.

The audit condition almost nobody mentions

Keeping the 0% is not only about the ratio. Every Qualifying Free Zone Person must maintain audited financial statements, whatever its revenue. Ministerial Decision 84 of 2025 sets the current requirement for tax periods beginning on or after 1 January 2025, and Ministerial Decision 82 of 2023 covered the periods before it.

A company turning over AED 800,000 and claiming free zone 0% needs an audit every year. The same company on Small Business Relief does not. That is a real recurring cost, and it belongs in the comparison before anyone elects anything.

Small Business Relief is often the better answer

Below AED 3 million revenue, Small Business Relief gives 0% on everything. No de minimis test. No five period cliff. No audit requirement attaching to the election itself. Ministerial Decision 131 of 2026 extended it to tax periods ending on or before 31 December 2029.

What you give up is that period's losses and net interest expenditure, which cannot be carried forward. For a profitable small company that is frequently worth very little, and it buys simplicity that is worth a great deal.

We say this to people who arrive wanting help protecting their QFZP status: for a company your size, the status may not be worth protecting. Owners rarely enjoy hearing it, because 0% under a free zone regime sounds like the sophisticated answer and Small Business Relief sounds like the beginner's one. The tax outcome is identical. The compliance burden is not.

What to do this week

Split last year's revenue three ways: free zone customers, mainland UAE customers, everyone abroad. Take the lower of 5% of the total and AED 5 million. Compare.

If you are close to the line, the decision to make is not how to squeeze under it. It is whether the status is the right election at all.

We built a calculator that runs this on your figures. Try it here. Nothing you type is sent anywhere.