Free Zones Sez Matrix

What this file is

This file is a content skill that loads on top of cross-border-workflow-base. It maps the world's principal free zones, special economic zones, and offshore financial centers as of mid-2025.

Tax year coverage. Current for fiscal year 2025, reflecting:

• UAE Corporate Tax Law (Federal Decree-Law No. 47 of 2022) in full force; "Qualifying Free Zone Person" (QFZP) regime under Ministerial Decision 139/2023 and Cabinet Decision 100/2023
• Saudi Arabia SEZs (Riyadh ILBZ, NEOM, KAEC, Jazan, Ras Al Khair, Cloud Computing) under RFAGZ Authority 2023
• Hainan Free Trade Port corporate tax incentives extending through 31 December 2025
• OECD BEPS Action 5 and Pillar Two interaction — many free-zone rates are below 15% and trigger top-up tax

The reviewer is the customer of this output. Free zone incorporation decisions are nearly impossible to reverse without exit cost. Every output must be reviewed by a credentialed local tax counsel before any incorporation, restructuring, or onshore-vs-zone election.

Section 1 — Scope statement

This skill covers:

• Tax rates (CIT, withholding, indirect)
• Qualifying activities for the preferential regime
• Substance requirements (employees, premises, expenditure)
• De minimis non-qualifying activity thresholds
• Onshore-mainland trading restrictions
• OECD BEPS Action 5 status
• Pillar Two interaction

This skill does NOT cover:

• Customs duty rates within the zone beyond a summary
• Employment / immigration law
• Real-estate leasing economics
• Sector-specific regulatory licensing (DFSA, ADGM FSRA, MAS, etc.)
• VAT mechanics within designated zones — see country VAT skills

Section 2 — UAE Free Zones

The UAE has ~45 free zones plus three financial center zones (DIFC, ADGM, QFC). Since the Federal Corporate Tax Law took effect for periods starting 1 June 2023 (most companies: FY 2024), all UAE entities (including free zone) are subject to CIT — but Qualifying Free Zone Persons (QFZPs) can benefit from a 0% rate on Qualifying Income.

2.1 Qualifying Free Zone Person (QFZP) regime

• QFZP qualification criteria [T1] — 1. Maintain adequate substance in the UAE (Article 7 of the Corporate Tax Law) 2. Derive Qualifying Income (Ministerial Decision 139/2023) 3. Not have elected to be subject to the standard 9% rate 4. Comply with the arm's length principle and transfer pricing rules 5. Maintain audited financial statements 6. Meet the de minimis requirement (non-qualifying revenue ≤ AED 5m or 5% of total revenue, lower) (Cabinet Decision 100/2023 Article 4)

Qualifying Income (Ministerial Decision 139/2023 / 265/2023 / 55/2023 amended) (Ministerial Decision 139/2023 / 265/2023 / 55/2023 amended)

Income type	Status
Transactions with other Free Zone Persons (except excluded activities)	Qualifying
Qualifying activities with non-Free Zone persons	Qualifying (subject to list — manufacturing, processing, holding shares/securities, ship management, fund management, wealth management, headquarters services, treasury and financing to related parties, distribution from a Designated Zone, certain logistics, certain processing)
Excluded activities (treated as non-qualifying even if otherwise within list)	Banking, insurance, finance & leasing (with non-related parties), ownership/exploitation of immovable property other than commercial property within a Free Zone, intellectual property (with exceptions for qualifying patents per Article 8 MD 139/2023)
Other income	Non-qualifying

• Substance test (Article 7) [T1] — - Premises in the UAE adequate to the level of activity - Adequate qualified employees - Adequate operating expenditure - The Core Income Generating Activities (CIGA) must be conducted in the UAE (Article 7)

2.2 UAE Free Zone matrix

UAE Free Zone matrix

Free Zone	Jurisdiction	Sector focus	CIT for QFZP	Notable
DIFC	Dubai (independent financial regulator DFSA)	Financial services, asset management, family offices	0% on Qualifying Income (else 9%)	English common law jurisdiction; ICC arbitration center
ADGM	Abu Dhabi (FSRA, common law)	Financial services, fintech, virtual assets	0% on Qualifying Income (else 9%)	Common law direct application; Crypto regulator; Variable Capital Company structure
DMCC	Dubai (Jumeirah Lakes Towers)	Commodities trading, services	0% / 9%	World's most-awarded FZ; gold/diamond/crypto licensing
JAFZA	Dubai (Jebel Ali Port)	Logistics, manufacturing	0% / 9%	Designated Zone for VAT purposes
DAFZA	Dubai Airport	Light manufacturing, services	0% / 9%	n/a
DWC	Dubai South (Al Maktoum Airport)	Aviation, logistics	0% / 9%	Aerospace sector cluster
Sharjah Media City (Shams)	Sharjah	Media, creative	0% / 9%	Low-cost license
SHAMS / SAIF Zone / SAIF / Hamriyah	Sharjah	Industrial, logistics	0% / 9%	n/a
RAKEZ	Ras Al Khaimah	Industrial, services	0% / 9%	Low-cost mainland-of-RAK regime
RAK ICC	Ras Al Khaimah	International Business Companies (offshore-style)	Not a typical FZ; international company regime; 0% CIT but separate from QFZP rules	Offshore holding vehicle
Fujairah Free Zone	Fujairah	Manufacturing, logistics	0% / 9%	Indian Ocean oil terminal proximity
Ajman FZ	Ajman	Light manufacturing	0% / 9%	n/a
Umm Al Quwain FTZ	UAQ	Light manufacturing	0% / 9%	n/a

• Onshore-mainland trading [T2] — A QFZP may sell to mainland UAE customers only through a mainland distributor OR via the QFZP de minimis (≤ AED 5m / 5%). Direct sales to mainland customers above de minimis convert the relevant revenue to standard 9%.

2.3 QFC (Qatar Financial Center)

QFC (Qatar Financial Center)

Item	Detail
CIT	10% on locally generated profits (not zero)
Common law jurisdiction	Yes
Sector focus	Financial services, asset management
Substance	Yes

Section 3 — Saudi Arabia SEZs

[T1] Saudi Arabia's Royal Commission for AlUla / SEZ Authority created four "general" SEZs in April 2023 (King Abdullah Economic City, Jazan, Ras Al Khair, Cloud Computing) plus NEOM and the Riyadh Integrated Logistics Bonded Zone (ILBZ).

Saudi Arabia SEZs

SEZ	Sector focus	CIT	Withholding	Customs
King Abdullah Economic City (KAEC) SEZ	Manufacturing, ICT, logistics	5% CIT for 20 years	0% on dividends, interest, royalties to non-residents (under conditions)	0% customs on goods kept within zone
Jazan SEZ	Manufacturing, food, mining	5% CIT for 20 years	0% withholding (conditions)	0% customs within zone
Ras Al Khair SEZ	Maritime, shipbuilding, MRO	5% CIT for 20 years	0% withholding (conditions)	0% customs within zone
Cloud Computing SEZ	Cloud, data centers	5% CIT for 20 years	0% withholding (conditions)	n/a
NEOM	Energy, tourism, urban tech, oxygen-based	Special bespoke regime — case-by-case	n/a yet	n/a
Riyadh ILBZ	Logistics, bonded re-export	0% CIT for 50 years	0% withholding (conditions)	0% customs

• Saudi Pillar Two overlay [T1] — Saudi has not yet adopted Pillar Two. For in-scope MNE groups, the low SEZ rate produces top-up tax exposure under IIR / UTPR in parent jurisdictions.

Section 4 — China and Hong Kong

China and Hong Kong

Zone	Detail
Hainan Free Trade Port	Encouraged industries: 15% CIT (vs 25% standard) through 31 December 2025; individual income tax cap at 15% for qualifying talent. The 15% rate may be extended — confirm 2025 budget.
Shanghai Lin-gang FTZ	Encouraged industries (integrated circuits, AI, biomedicine, civil aviation): 15% CIT for 5 years (case-by-case)
Shenzhen Qianhai	Modern services, FinTech: 15% CIT for qualifying industries through 31 Dec 2025
Hengqin (Guangdong-Macao)	15% CIT for encouraged industries
General FTZs (Shanghai, Tianjin, Fujian, Guangdong)	Standard 25% CIT but customs/foreign exchange relaxations
Hong Kong	Two-tier profits tax: 8.25% on first HKD 2m, 16.5% above. Territorial-source system. Offshore claim possible; FSIE regime since 2023 for passive income. Not a "zone" in the SEZ sense — Hong Kong is a separate jurisdiction.

Section 5 — India SEZs

[T1] SEZ Act 2005 with phased reforms. DESH Bill (Development of Enterprise and Service Hubs) proposed in 2022–2023 to replace SEZs has not been enacted as of mid-2025.

India SEZs

Item	Detail
Sunset clause	SEZ tax benefits (Section 10AA) progressively phased out for new units commencing operations after 30 June 2020 (100% deduction for 5 years, then 50% for 5 years, then 50% conditional). Most new SEZ units now have minimal CIT benefit.
GST	Supplies to SEZ units are zero-rated; SEZ unit pays customs duty on imports as "imports into India" upon clearance into DTA
GIFT City IFSC	Separate regime under IFSCA Act 2019; 10-year CIT holiday available for 10 of 15 years for qualifying units

Section 6 — Latin America and Caribbean

Latin America and Caribbean

Zone	Detail
Panama Colón Free Trade Zone	0% on re-export profits (territorial system); customs duty exemption on goods re-exported
Panama City of Knowledge	Tax incentives for IT, training, R&D
Costa Rica Zonas Francas	0% CIT for 8-12 years for qualifying activities (manufacturing, services); 50% for next 4-6 years
Dominican Republic Zonas Francas	100% exemption from CIT, withholding, customs duties for export-oriented activities; 100% during specified periods
Honduras ZEDE	Special zones with bespoke tax regimes (status politically contested)
Uruguay Zonas Francas	100% CIT exemption for qualifying activities
Cayman Islands	No corporate income tax; no withholding; no capital gains. Exempted Company structure. Pillar Two: Cayman implementing QDMTT from 2025.
BVI	0% CIT; no withholding. Business Companies Act. Economic substance per ESA 2018. Pillar Two: BVI implementing TBI tax responses.
Bahamas	No CIT; introduced 15% Domestic Top-up Tax effective 2024 for in-scope MNEs.
Bermuda	0% CIT through 2024; introduced 15% Corporate Income Tax effective 1 January 2025 (Pillar Two-aligned)
Barbados	9% standard CIT (since reform 2024); special economic substance and IP regime

Section 7 — Europe and Mediterranean

Europe and Mediterranean

Zone	Detail
Madeira International Business Centre (Madeira Free Zone)	5% CIT through 31 December 2027 (EU State Aid extension); employment minimums; capped by annual taxable income ceilings
Azores (Azores Tax Benefits)	Reduced national CIT; not a classic IBC
Cyprus (not a free zone but offshore-style)	Standard 12.5% CIT; IP box at 80% deduction (see ip-patent-box-matrix); shipping tonnage tax
Gibraltar	12.5% CIT (rising to 15% from 2025 for in-scope MNEs under Pillar Two); territorial-source system
Malta	Standard 35% CIT but 6/7 refund mechanism reduces effective rate to 5% for non-Malta shareholders. Pillar Two: 15% top-up subject to QDMTT for in-scope groups.
Luxembourg	Standard 17% CIT + ~7% municipal. SOPARFI holding regime. IP box at 80%. Pillar Two: QDMTT in force.
Ireland (IFSC legacy / Section 110)	Standard 12.5% CIT; Section 110 securitisation SPVs; KDB IP regime. Pillar Two: Ireland in-force from 2024.
Isle of Man	0% CIT (standard) with 10% for banking and large retailers, 20% for property rental income. Pillar Two: 15% DMTT proposed for 2025.
Jersey / Guernsey	0% CIT (standard); 10% for financial services; 20% for utilities. Pillar Two: 15% IIR / QDMTT proposed for 2025.
Monaco	33.33% CIT but only on activities outside Monaco or > 25% non-Monaco turnover; residents (individuals) generally exempt from personal income tax
Andorra	10% CIT
San Marino	17% CIT; reduced rates for new enterprises

Section 8 — Africa

Africa

Zone	Detail
Mauritius Global Business Licence (GBL)	15% CIT but with partial exemption (effective 3% on qualifying activities); GBL2 abolished post-2018; substance requirements
Mauritius Freeport	0% CIT for qualifying freeport activities (manufacturing, warehousing, distribution to non-Africa-mainland exports); customs duty exempt
Labuan IBC (Malaysia)	Trading companies: 3% of audited net profits OR MYR 20,000 flat (election); non-trading: 0%
Tanger Free Zone (Morocco)	0% CIT for 5 years for export-oriented qualifying activities; 8.75% thereafter
Egypt SEZs (Suez Canal Economic Zone, NUCA)	Reduced CIT rates; customs and VAT incentives
Nigeria FTZs (Lagos, Calabar, Lekki)	100% CIT exemption for activities within the FTZ; customs exemption
Kenya EPZs / SEZs	10-year CIT holiday + reduced rates thereafter; customs duty waiver
South Africa SEZs	15% CIT (vs 27% standard) for qualifying companies; section 12R Income Tax Act
Botswana IFSC	15% CIT (vs 22% standard) for IFSC-certified companies in financial services

Section 9 — Mechanics — substance test (universal pattern)

Substance test — universal pattern [T1]

Element	Typical requirement
Premises	Adequate to activity (rented lab/office in zone)
Employees	Adequate count + qualifications; CIGAs performed by employees in zone
Operating expenditure	Adequate in-zone OPEX; can include outsourced services subject to control
Decision-making	Strategic decisions taken in zone (board meetings, key personnel resident)
Records	Maintained in zone, available to regulator

• Economic Substance Regulations (ESA) [T1] — Economic Substance Regulations (ESA) applied in BVI, Cayman, Bermuda, Bahamas, Jersey, Guernsey, Isle of Man, Anguilla, TCI, Mauritius — for "relevant activities" (banking, distribution, headquarters, finance/leasing, fund management, holding, IP, insurance, shipping). Failure to satisfy: penalties, public-register exposure, mandatory exchange to tax authorities of beneficial owner's country.

Section 10 — Pillar Two interaction

• Pillar Two Top-up Tax trigger [T1] — Free zone regimes producing ETRs below 15% trigger Pillar Two Top-up Tax for MNE groups with consolidated revenue ≥ EUR 750m (see pillar-two-globe-minimum-tax.md).

Pillar Two interaction by zone family

Zone family	Pillar Two response
UAE	UAE introduced Domestic Minimum Top-up Tax (DMTT) effective 1 January 2025 (Cabinet Decision 142/2024). QFZPs continue at 0% but DMTT applies to bring jurisdictional ETR to 15% for in-scope groups.
Bermuda	New 15% Corporate Income Tax from 2025 (Pillar Two-aligned).
Bahamas	15% DMTT from 2024.
Cayman	Cayman QDMTT effective 2025.
Saudi Arabia SEZs	Not yet Pillar Two-implemented; top-up exposure remains at parent IIR / UTPR level.
Hong Kong	Hong Kong DMTT effective 2025 for in-scope MNEs; tax on Mainland-China-sourced income may also enter scope.
Singapore	DTT (QDMTT) and IIR from 2025; UTPR not yet enacted.
Madeira IBC	Portugal QDMTT under EU Directive; benefits clawed back for in-scope groups.
Mauritius	Pillar Two QDMTT considered but not yet enacted; top-up at parent level.

Section 11 — Output specification

The reviewer brief must include:

1. Zone selection rationale — why this zone vs alternatives; commercial fit.
2. Qualifying activity confirmation — every revenue stream classified within the zone's qualifying list.
3. Substance plan — premises, employees, OPEX, decision-making with named individuals and minimum headcount.
4. De minimis tracking — non-qualifying revenue forecast and headroom under cap.
5. Onshore-mainland trading plan — distributor structure (UAE) or DTA mechanics (India).
6. Withholding tax position on inbound and outbound flows; treaty access analysis.
7. Pillar Two analysis — group revenue test; if in-scope, model the top-up tax under DMTT and at parent level.
8. Economic Substance Regulations compliance (where applicable).
9. Reviewer questions — open items flagged as [T2] or [T3].

Section 12 — Self-checks

• Zone regime tested for OECD FHTP harmful-tax-practice status (not removed from approved list).
• Qualifying activity confirmed against the zone's published qualifying list, not assumed by analogy.
• De minimis cap applied (UAE QFZP 5%/AED 5m, others as specified).
• Substance plan documents adequate premises, headcount, OPEX.
• Pillar Two scope test (EUR 750m) applied; DMTT and top-up modelled.
• Onshore-mainland sale routing documented; arm's length pricing confirmed.
• Treaty access (LOB, beneficial ownership, principal purpose test) tested for major withholding flows.
• Economic Substance Regulations compliance documented for ESA-relevant zones.
• Audited financials and TP documentation obligations noted.
• Output flags every [T2]/[T3] item for reviewer judgement.

Section 13 — Prohibitions

• Do not advise on incorporating in a zone whose regime has been removed from the OECD FHTP approved list without confirming current status.
• Do not treat a non-qualifying activity as qualifying because related activities are listed — the regime is enumeration-based.
• Do not assume the de minimis cap allows mainland sales — the cap is on revenue, not transactions.
• Do not ignore Pillar Two top-up tax for groups above the EUR 750m threshold — the zone benefit may be clawed back in full.
• Do not advise on holding IP in a free zone without checking the country's IP-box overlay rules and BEPS Action 5 nexus requirements.
• Do not promise treaty access without testing the relevant LOB / PPT clauses.

Section 14 — Disclaimer

This skill and its outputs are provided for informational and computational purposes only and do not constitute tax, legal, or financial advice. Zone regimes evolve with national budgets and OECD peer review. Pillar Two implementation has materially altered the benefit calculus for in-scope groups. Every output must be reviewed and signed off by a credentialed local tax counsel before any incorporation, restructuring, or election decision.

The most up-to-date, verified version of this skill is maintained at openaccountants.com.