First, know the two kinds of free zone company
A Meydan company is a “Free Zone Person”. The 0% rate is reserved for a Qualifying Free Zone Person (QFZP), and only on its qualifying income. Its non-qualifying income is taxed at 9%.
1. Is your income “qualifying”?
Qualifying income broadly includes income from other free zone persons, income from non-free zone persons for listed qualifying activities, and qualifying IP income. Income from a permanent establishment or from non-qualifying property doesn’t qualify. Check your revenue by client type and activity before assuming anything.
2. Is your activity on the qualifying list?
The list sits in Ministerial De1cision 229 of 2025, which replaced Ministerial Decision 265 of 2023 and applies from 1 June 2023. Qualifying activities include manufacturing, trading of qualifying commodities, holding shares, fund and wealth management, headquarter and treasury services, and logistics. Excluded activities include banking, most insurance, most finance and leasing, most dealings with individuals, and non-qualifying property activities. Compare your real activity with the current list, not just your trade license. If you filed on the old list, the retroactive change is worth a second look.
3. Are you within the de minimis limit?
Non-qualifying revenue must stay at or below the lower of 5% of total revenue or AED 5 million. Breach it and you lose QFZP status for that year and the next four. Track it through the year, not just at year-end.
4. Can you show real substance?
You need to carry out your core income-generating activities in the free zone, with adequate assets, qualified full-time employees and operating expenses there. A license and a flexi-desk alone are a risk.
5. Is your transfer pricing in order?
Related-party and connected-person transactions must follow the arm’s length principle and be documented. Weak documentation puts the 0% rate at risk.
6. Are your financial statements audited?
QFZPs must prepare audited financial statements, regardless of revenue. Start early, because auditors need reconciled books.
7. Have you registered and filed?
Every free zone company must register and file, even at an expected 0%. Returns are due nine months after year-end. Late filing costs AED 500 a month for the first 12 months, then AED 1,000 a month. Late registration carries a AED 10,000 penalty.
A note on Small Business Relief
If you’re not a QFZP and your revenue has stayed at AED 3 million or below in every period, you may be able to elect Small Business Relief. It applies only to tax periods ending on or before 31 December 2026, and it’s not available to QFZPs.
Quick self-check
Who pays us: free zone clients, overseas clients, or mainland clients?
Is our main activity on the current qualifying list?
What percentage of revenue is non-qualifying?
Can we show people, spend and assets in the free zone?
Are related-party dealings documented?
Are our books audit-ready?
Not sure your Meydan company is at 0% CT? Start with Kitaab!
A Meydan license is the starting point, not the guarantee. Classify your income, watch your non-qualifying revenue, and keep clean records all year.
Not sure where your company stands? Speak to the Kitaab team for a corporate tax review before your next filing.
