The Federal Tax Authority (FTA) has released a detailed guide on the application of Corporate Tax to Free Zone Persons aligned with the Free Zone Corporate Tax regime. This regime allows Qualifying Free Zone Persons to benefit from a 0% Corporate Tax rate on Qualifying Income.
The guide provides comprehensive instructions on the Corporate Tax Law’s application to Free Zone Persons. It outlines the criteria that must be met for a Free Zone Person to be considered a Qualifying Free Zone Person, thus eligible for the 0% Corporate Tax rate. It also specifies which activities are deemed Qualifying Activities and Excluded Activities for these entities.
Including numerous examples, the guide aims to help businesses understand the key elements of the Corporate Tax Law as they apply to Free Zone Persons. It explains how to calculate Corporate Tax for Free Zone Persons, determine Qualifying Income, and identify taxable income subject to the 9% Corporate Tax rate. Additionally, it covers the requirements for maintaining adequate substance for Qualifying Free Zone Persons and the criteria for establishing a Foreign or Domestic Permanent Establishment.
The guide further clarifies the treatment of income from immovable property and Qualifying Intellectual Property, providing a detailed explanation of Qualifying Activities, Excluded Activities, and compliance requirements.
The FTA highlighted that if a Qualifying Free Zone Person operates through a Permanent Establishment in the UAE (outside Free Zones) or in a foreign country, the profits attributable to such establishments will be subject to the 9% Corporate Tax rate.
Free Zones play a crucial role in the UAE economy, driving economic growth and transformation locally and internationally. They offer businesses various benefits, including relaxed foreign ownership restrictions, streamlined administrative procedures, modern infrastructure, developed business communities, and various legal entity forms and commercial activities.
In a statement, the FTA urged all Free Zone Persons to read the guide thoroughly to fully understand the definitions and interactions of the different rules. The Corporate Tax implementing decisions and guides, including the new guide on Free Zone Persons, are available on the FTA’s website.
