Worked position · Ungated · Computed live
A Free Zone software group with three intangibles
How much of this Qualifying Free Zone Person’s intellectual-property income is taxed at 0%, and what does the answer turn on?
The facts
- A Qualifying Free Zone Person in the UAE, developing and licensing software.
- Three intangibles: a granted patent, a registered trademark, and unregistered know-how.
- R&D on the patent is split between the group’s own team, a contractor in the UAE, an unrelated contractor abroad, and a related company abroad.
- Part of the patent was acquired rather than developed.
The amounts are illustrative. The classification, the fraction, the tax and every citation are computed live by the same engine the Qualifying IP service calls.
Each intangible, and why
| Intangible | Outcome | Overall income | Qualifying expenditure | Overall expenditure | Up-lift allowed |
|---|---|---|---|---|---|
| Granted patent — core encoding methodCD 100 Art. 1 names Patents in the first limb of the definition. | Qualifying IP | AED 12,000,000 | AED 8,000,000 | AED 13,000,000 | AED 2,400,000 |
| Registered trademark — product brandCD 100 Art. 1 closes by excluding "any marketing related intellectual property assets, such as trademarks". The exclusion is categorical — no amount of R&D expenditure brings a trademark into the nexus fraction. | Not Qualifying IP | AED 6,000,000 | AED 4,000,000 | AED 4,000,000 | AED 0 of AED 1,200,000 claimed |
| Unregistered know-how — deployment processKnow-how and trade secrets are not within the CD 100 Art. 1 enumeration. The functional-equivalence limb requires a right "subject to a similar approval and registration process to a Patent", and an unregistered secret has none by definition. | Not Qualifying IP | AED 3,000,000 | AED 1,500,000 | AED 1,500,000 | AED 0 of AED 450,000 claimed |
| A registered right of unstated typeClassification turns on whether the right is legally protected AND subject to an approval and registration process similar to a Patent (CD 100 Art. 1). That is a facts-and-registration question, not a computation — the engine will not assume it either way. | Refused — a question of fact | AED 2,000,000 | AED 900,000 | AED 900,000 | AED 0 of AED 270,000 claimed |
The position
- Overall IP income
- AED 23,000,000
- Qualifying Income — taxed at 0%
- AED 9,600,000
- Taxable IP income — 9%
- AED 13,400,000
- Corporate Tax
- AED 1,206,000
- Effective rate on IP income
- 5.24%
What this does not decide
One intangible above returned a refusal rather than an answer. The engine states what the question turns on and declines to settle it, because whether a right is subject to a registration process similar to a Patent is a fact about the register, not a computation.
- AED 13,400,000 of intellectual property income is taxable, and CD 100 Art. 4(3)(c) keeps it OUT of the de minimis calculation on both sides. This is the rule most often applied backwards: non-qualifying IP income does not threaten Qualifying Free Zone Person status through the de minimis test — it is simply taxed at 9%.
- 1 asset(s) returned ASSESS rather than a settled verdict. CD 100 Art. 1 admits a right only where it is legally protected AND subject to an approval and registration process similar to a Patent; whether a given right meets that is a registration fact, not a calculation.
- 1 asset(s) are marketing-related intellectual property. The CD 100 Art. 1 exclusion of "any marketing related intellectual property assets, such as trademarks" is categorical — R&D expenditure cannot bring a brand into the fraction, and structuring that routes brand royalties through a free zone achieves nothing under this Article.
- Where the fraction is below 1, the shortfall is caused only by out-of-State related-party R&D and by acquisition cost. Note that related-party R&D conducted INSIDE the State is fully qualifying under MD 229 Art. 4(2)(a) and CD 100 Art. 8(3) — commentary stating that related-party expenditure is excluded without that distinction is wrong, and it is wrong in the direction that overstates tax.
- MD 229 Art. 4 prescribes no rounding of the nexus fraction. The fraction is applied unrounded here; the percentage shown is presentation only.
- Qualifying Income is only reachable if the Person is a Qualifying Free Zone Person for the period at all. MD 229 Art. 5 adds two conditions to FDL 47/2022 Art. 18 — the de minimis requirement and audited financial statements under Ministerial Decision No. 84 of 2025 — and Art. 5(2) removes the status for the relevant Tax Period AND the subsequent four Tax Periods if any condition fails. This engine computes the IP fraction; it does not establish the status.
Every figure, cited to the article
- Cabinet Decision No. 100 of 2023, Art. 1 — "Qualifying Intellectual Property: Patents, Copyrighted Software and any right functionally equivalent to a Patent that is both legally protected and subject to a similar approval and registration process to a Patent, such as utility models, intellectual property assets that grant protection to plants and genetic material, orphan drug designations, and extensions of Patent protection, but not including any marketing related intellectual property assets, such as trademarks."
- Cabinet Decision No. 100 of 2023, Art. 7(1)-(2) — Qualifying Income from Qualifying Intellectual Property is calculated per a Ministerial Decision; income from non-Qualifying Intellectual Property and income in excess of that Qualifying Income is Taxable Income
- Cabinet Decision No. 100 of 2023, Art. 4(3)(c) — Revenue from the ownership or exploitation of intellectual property, other than Revenue related to the Art. 7(1) Qualifying Income, is excluded from BOTH non-qualifying Revenue and total Revenue in the de minimis calculation
- Cabinet Decision No. 100 of 2023, Art. 8(3) — core income-generating activities for Qualifying Intellectual Property may be outsourced to any Person in the State and to any non-Related Party outside the State, with adequate supervision
- Ministerial Decision No. 229 of 2025, Art. 4(1)-(4) — Qualifying Income = (Qualifying Expenditures + Up-lift Expenditures) / Overall Expenditures x Overall Income; up-lift is 30% of Qualifying Expenditures and applies only to the extent the up-lifted figure is less than or equal to Overall Expenditures (Art. 4(3)); the record-keeping conditions are in Art. 4(4). Effective 1 June 2023 (Art. 7); repeals Ministerial Decision No. 265 of 2023 (Art. 6)
- Federal Decree-Law No. 47 of 2022, Art. 3(2) — 0% on Qualifying Income, 9% on Taxable Income that is not Qualifying Income. The AED 375,000 zero band in Art. 3(1)(a) applies to the general regime, NOT to a Qualifying Free Zone Person
- Federal Decree-Law No. 47 of 2022, Art. 34 — arm’s length principle, applied by MD 229 Art. 4(2)(c) to embedded intellectual property income from the sale of products and the use of processes