De Minimis test: A criteria for free zone businesses to pay 0% corporate tax in the UAE

De Minimis test: A criteria for free zone businesses to pay 0% corporate tax in the UAE

The non-qualifying income (NQI) of a qualified free zone person (QFZP), if not exceeded the de minimis requirement, will be treated like a qualified income (QI) and will attract zero per cent corporate tax. The de minimis requirements shall be considered satisfied where the NQI derived by the QFZP in a tax period does not exceed five per cent of the total revenue of the QFZP in that tax period or Dh5 million, whichever is lower. While calculating the above-mentioned threshold, we cannot consider all related revenues, but specific rules have been given to calculate and apply the de minimis test. Article 4(2)(a) of the cabinet decision No. 55 of 2023 (the decision), states that NQI is the income derived from (i) excluding activities from transactions with free zone and non-free zone persons and (ii) non-qualifying activities where transactions are with non-free zone person. Article 4(2)(b) of the decision describes that the total revenue includes all revenue derived by a QFZP in a tax period. Article 4(3) of the decision carrying exclusion of revenue while calculating the NQI and total income, and it defines that the revenue from the permanent establishment (domestic and foreign) of the QFZP and revenue from