Corporate Tax for Free Zone Companies in UAE

Corporate Tax For Free Zone Companies in UAE with qualifying income will be 0%. Corporate Tax For Free Zone Companies with non qualifying income will be 9%. As per the law, businesses will be liable for corporate tax in UAE from the beginning of their financial year, starting on or after June 1, 2023.

Free Zone (including financial free zones) businesses in UAE will be subject to Corporate Tax. However, it has been clarified that the Corporate Tax regime will continue to honor the corporate tax incentives currently being offered to free zone businesses that comply with all regulatory requirements and that do not conduct business in mainland UAE. Businesses established in a free zone will be required to register and file a Corporate Tax Return.

When can a Free Zone Person be a Qualifying Free Zone Person?

A Free Zone Person that is a Qualifying Free Zone Person can benefit from a preferential Corporate Tax rate of 0% on their “Qualifying Income” only.

In order to be considered a Qualifying Free Zone Person, the Free Zone Person must:

• Adequate workforce, assets, and income-generating activities are carried out in the UAE. Furthermore, the business should be managed and controlled in the UAE.
• The business should earn qualifying income.;
• Not have made an election to be subject to Corporate Tax at the standard rates; and
• Comply with the transfer pricing requirements under the Corporate Tax Law.

What is a qualifying income for UAE Free Zone Companies?

Qualifying income is income derived by the Free Zone companies through transactions with businesses located outside the UAE, within the same free zone, or in any other free zone in the UAE. If non-passive income is derived from the UAE’s mainland, then the income sourced from the mainland will be subject to standard tax rates and will be considered as non qualifying income.

However, the remaining income will be subject to a 0% rate. Passive income derived from owning shares, royalties, or capital gains through investing in mainland companies will be subject to 0% tax.

Corporate Tax Filing for Free Zone Companies in UAE

Even if the free zone company is designated as a Qualifying Free Zone Person (QFZP), the need to file for corporate tax will remain the same. The subject of corporate tax is still developing in the UAE; therefore, there is a lot of further information due from the FTA.

Corporate Tax Registration for Free Zone Companies in UAE

The UAE Corporate tax registration applies to all businesses whether they are subject to 0 percent or 9 percent corporate tax. We are offering best and hassle free corporate tax registration services in UAE. In order to apply for the corporate tax number, certain set of documents required for corporate tax registration in UAE. All the companies in UAE must register for Corporate Tax in UAE. 

Corporate Tax Rates in UAE

0% corporate tax rates in UAE apply to taxable income up to AED375,000 and 9% corporate tax rate in UAE apply to taxable income over AED375,000.

How can we help?

Many UAE businesses will face a difficult journey across unfamiliar terrain as they prepare for and comply with the new federal corporate income tax. Despite much ambiguity, UAE corporate tax will affect business plans, strategies, and legal agreements.

As your local experts, we know what you can expect from the final law and how it will affect the operation of your entire business. Taking advantage of tax relief is one of the most important things your UAE business can do to survive and thrive. Xact Auditing can undoubtedly help with that!

Tax experts at Xact Auditing can help your UAE business take advantage of tax relief.

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