The UAE government and the Ministry of Finance have announced long-awaited clarifications regarding the taxation rules for companies operating in Free Zones.
Please find below the brief summary of the updates, to get a clearer understanding of what to expect and how you UAE-based business may be affected.
Tax Rates:
- 0% tax on qualifying income
- 9% tax on non-qualifying income
Qualifying Income Includes:
- Earnings from transactions with other free zone entities (excluding income from "excluded activities")
- Income from non-free zone entities related to "qualifying activities"
- Additional income that meets de minimis requirements
“Excluded Activities” Include:
- Individual dealings
- Regulated financial operations
- Intellectual property
- Property ownership (with certain exceptions)
Qualifying Activities Include:
- Manufacturing
- Securities ownership
- Vessel operation
- Regulated reinsurance
- Fund/wealth management
The de minimis requirements are considered met if the non-qualifying income does not exceed 5% of the total income or AED 5,000,000, whichever is lower.
Non-Qualifying Income:
- Exceeds 5% of total income or AED 5,000,000
- Derived from excluded activities or non-qualifying activities with non-free zone entities
Entities failing to meet qualifying conditions will be subject to a 9% tax rate for a minimum of five years.
Tax, Accounting and Consulting Services:
Staying on top of regulatory changes can be challenging. That's why partnering with an experienced accounting firm like VK LAW CONSULTANCY FZ-LLC is essential. Our team of seasoned accountants has in-depth knowledge of local accounting standards, legislation, and tax regulations. We are fully prepared to guide your business through these new taxation rules, ensuring that you meet all requirements and take full advantage of the potential benefits. We're here to help strengthen your business controls, assist in risk prevention, and provide reliable tax consulting services tailored to your specific needs.
Please contact us to learn more about your new tax obligations or schedule a free consultation.
