A Qualifying Free Zone Person has total revenue of AED 80 million for a tax period, of which AED 3.5 million is Non-Qualifying Revenue. Under UAE Corporate Tax Law's de minimis requirement for Qualifying Free Zone Persons, does this Non-Qualifying Revenue cause the entity to fail the de minimis test?
- No, because AED 3.5 million is below both the AED 5 million cap and 5% of AED 80 million (AED 4 million), and the de minimis test uses whichever of those two figures is lower
- Yes, because any Non-Qualifying Revenue at all disqualifies a Qualifying Free Zone Person, regardless of amount
- No, because the de minimis test only applies to Free Zone Persons with total revenue below AED 50 million
- Yes, because AED 3.5 million exceeds a flat AED 3 million de minimis cap that applies to every Qualifying Free Zone Person
Why A? And why not the others?
Correct answer: A. No, because AED 3.5 million is below both the AED 5 million cap and 5% of AED 80 million (AED 4 million), and the de minimis test uses whichever of those two figures is lower
The de minimis requirement for Qualifying Free Zone Persons caps Non-Qualifying Revenue at the lower of AED 5 million or 5% of total revenue for the tax period. Here 5% of AED 80 million is AED 4 million, which is lower than the flat AED 5 million cap, so the applicable threshold is AED 4 million; AED 3.5 million of Non-Qualifying Revenue is below that, so the test is passed and Qualifying Free Zone Person status is retained. Option B is wrong because the rule is a quantified de minimis threshold, not a zero-tolerance rule. Option C is wrong because the test's threshold is calculated from each entity's own revenue figures and applies regardless of the entity's total revenue size. Option D is wrong because there is no flat AED 3 million cap in the de minimis rule; the actual comparison is between AED 5 million and a 5% calculation.
Source: UAE Federal Decree-Law No. 47 of 2022, Article 18 and Ministerial Decision No. 265 of 2023 (Qualifying Free Zone Person de minimis requirement)