UAE Tax CT Free zones, small business relief and exempt income: practice questions with answers

Question 1

Mirqab Trading FZE, a Qualifying Free Zone Person, reports FY2026 total revenue of AED 140,000,000. Non-qualifying revenue (all from transactions with mainland customers outside any qualifying activity) is AED 5,600,000. Which statement about the de minimis requirement is correct?

1. A It is met, because AED 5.6m is only 4% of total revenue, below the 5% limit.
2. B It fails, because AED 5.6m exceeds AED 5,000,000, which is the lower of the two limits.
3. C It fails, because non-qualifying revenue exceeds AED 3,000,000 in the tax period.
4. D It is met, because the AED 5m cap applies only where revenue is below AED 100m.

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Answer: B. De minimis limit = lower of 5% x AED 140,000,000 = AED 7,000,000 and AED 5,000,000, so AED 5,000,000 (Cabinet Decision No. 100 of 2023, Article 4).

Non-qualifying revenue of AED 5,600,000 is 4% of total revenue but exceeds AED 5,000,000, so the requirement is failed. For large free zone businesses (revenue above AED 100m) the fixed AED 5m cap is always the binding limit. Failing the test means Mirqab ceases to be a QFZP from the start of FY2026 (Article 18, CT Law; MD 229/2025).

Question 2

Mizan Aromatics FZE, a Qualifying Free Zone Person, has FY2026 total revenue of AED 52,000,000. This includes AED 2,000,000 of rent from residential apartments it owns in its Free Zone. Its only other non-qualifying revenue is AED 2,450,000 from sales to individual consumers. Which statement about the de minimis test is correct?

1. A Met: AED 2,450,000 does not exceed AED 2,500,000, as the rent is left out of both figures.
2. B Failed: AED 4,450,000 exceeds AED 2,600,000, as the rent is non-qualifying revenue.
3. C Met: AED 4,450,000 does not exceed AED 5,000,000, the de minimis limit for the period.
4. D Failed: AED 2,450,000 exceeds AED 2,377,500, as only qualifying revenue counts.

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Answer: A. Article 4(3) of Cabinet Decision No. 100 of 2023 excludes from both non-qualifying revenue and total revenue certain Free Zone property income, including revenue from immovable property that is not commercial property (such as residential apartments). That rent is taxed at 9% regardless, but it does not count in the de minimis test.

Total revenue for the test = 52,000,000 - 2,000,000 = AED 50,000,000. Limit = lower of 5% x 50,000,000 = AED 2,500,000 and AED 5,000,000 = AED 2,500,000. Non-qualifying revenue AED 2,450,000 ≤ AED 2,500,000, so the test is met.

Question 3

Taraf Holding FZ-LLC, a Qualifying Free Zone Person, earns FY2026 fees from (1) managing and overseeing the businesses of its mainland subsidiaries and (2) providing the same management services to an unrelated mainland company under a five-year contract. How are the fees classified?

1. A (1) and (2) are both Qualifying Income, because the services are the same
2. B (1) is non-qualifying income, because the subsidiaries are mainland persons
3. C (1) and (2) are both non-qualifying income, because management fees never qualify
4. D (1) is Qualifying Income; (2) is non-qualifying income

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Answer: D. Headquarter services to Related Parties (administering, overseeing and managing the business of related parties) are a Qualifying Activity under Ministerial Decision No. 229 of 2025. Income from them qualifies even where the related parties are mainland persons (Cabinet Decision No. 100 of 2023, Article 3(1)(b)).

The same services to an unrelated mainland company are not within any Qualifying Activity, so that fee is non-qualifying revenue for the de minimis test.

Question 4

Tarfa Events LLC (31 December year-end) elected Small Business Relief for FY2025 and FY2026. Without the election it would have had a tax loss of AED 420,000 in FY2025. In FY2027 its revenue is AED 3.6m and its taxable income before any loss relief is AED 980,000. Rates: 0% up to AED 375,000 and 9% above. What is Tarfa's Corporate Tax payable for FY2027?

1. A AED 16,650
2. B AED 88,200
3. C AED 50,400
4. D AED 54,450

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Answer: D. Under Ministerial Decision No. 73 of 2023 (as amended), tax losses incurred in a tax period for which Small Business Relief is elected cannot be carried forward, and Article 21(2) of the CT Law switches off tax loss relief for that period. FY2027 revenue exceeds AED 3m, so relief is not available.

CT payable = (AED 980,000 - AED 375,000) x 9% = AED 54,450.

Question 5

Tilal Holding LLC, a UAE resident company with a 31 December year-end that reports under IFRS, plans to transfer a warehouse to one of four subsidiaries. Which transfer can be made under Qualifying Group Relief?

1. A To Tilal Marine FZE, 100% owned, which is a Qualifying Free Zone Person
2. B To Tilal Cold Chain LLC, 80% owned, a mainland company with a 31 December year-end using IFRS
3. C To Tilal Retail LLC, 90% owned, whose financial year ends on 31 March
4. D To Tilal Agro LLC, 70% owned, a mainland company with a 31 December year-end using IFRS

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Answer: B. Under Article 26(2) of the CT Law, two taxable persons are in the same Qualifying Group if both are resident juridical persons (or non-residents with a UAE PE), one holds at least 75% of the other (or a third person holds 75% of each), neither is an exempt person or a QFZP, their financial years end on the same date and they use the same accounting standards.

Only the transfer to the 80%-owned Tilal Cold Chain LLC satisfies every condition.

Question 6

Four UAE family foundations are considering applying under Article 17 of the CT Law to be treated as unincorporated partnerships (tax transparent). Which one can apply?

1. A A foundation that owns and runs two hotels and pays the profits to the family
2. B A foundation that holds and manages the family's investment portfolio for named family members
3. C A foundation formed mainly to move income out of the family members' taxable businesses
4. D A foundation that operates a commercial lending business for the public

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Answer: B. Article 17 of the CT Law lets a family foundation apply to be treated as an unincorporated partnership (so its income is taxed in the hands of its founders/beneficiaries rather than the foundation) if it is established for identifiable beneficiaries or a public benefit entity, its principal activity is receiving, holding, investing or managing assets, it does not conduct a business, and avoiding tax is not its main purpose. Approval takes effect from the period of application or a later period.

Only the investment-holding foundation meets these conditions.