The Benefits of Free Zone Companies in UAE for Corporate Tax- AMCA AUDITING

Corporate Tax Rates in Free Zones

• As per the Corporate Tax regulation, businesses recognized as Qualifying Free Zone Persons can enjoy a 0% Corporate Tax rate on their qualifying income, provided they meet certain conditions. To know whether a specific Free Zone is eligible for the 0% rate, businesses can contact the authority of their respective Free Zones and perform an assessment on whether they meet the criteria for a Qualifying Free Zone Person.

• The income that is Non-Qualifying will be subjected to a standard 9% Corporate tax rate. However, a Qualifying Free Zone person will be subjected to a 9% Corporate Tax rate without being disqualified from the free zone regime on the following income:

  1. Income attributable to a Foreign Permanent Establishment and Domestic Permanent Establishment

  2. Income from Immovable Property located in a Free Zone (other than Commercial Property located in a Free Zone when the income arises from a transaction with a Free Zone Person)

  3. Income from the ownership or exploitation of intellectual property (other than Qualifying Income from Qualifying Intellectual Property).

UAE Free Zone Corporate Tax Requirements

Despite the exemption from the standard 9% Corporate Tax Rate, it is mandatory for all free zone persons to register for UAE Corporate Tax, whether they are Qualifying Free Zone Persons or Non-Qualifying Free Zone Persons. Additionally, they must obtain a Tax Registration Number and file a Corporate Tax Return. Additionally, a Qualifying Free Zone Person is mandated to submit audited financial statements and maintain transfer pricing documentation. 

Qualifying Free Zone Person

In order to be eligible for a 0% UAE free zone corporate tax rate, it is required to be a Qualifying Free Zone person who meets certain conditions. To be considered a Qualifying Free Zone Person, the following conditions must be met:

• Qualifying Income should be derived from relevant transactions
• Adequate substance must be maintained within the Free Zone
• The non-qualifying revenues in a Tax Period must not exceed the de-minimis requirement.
• The person should not have elected to be subjected to corporate tax
• Compliance with the transfer pricing rules and documentation under the Corporate Tax law must be ensured
• Audit financial statements must be prepared and maintained for Corporate Tax purposes.

Qualifying Income

A Qualifying Income is an income that is eligible for a 0% UAE Free Zone Corporate Tax rate. A Qualifying income includes:

• Income derived from transactions with other Free Zone persons, excluding income derived from excluded activities.  

• Income derived from transactions with any domestic and foreign Non-Free Zone Person, only in regard to Qualifying activities that are not excluded activities.

• Any other income meeting the de-minimis requirement.

• Qualifying income derived from the ownership or exploitation of Qualifying Intellectual Property.

AMCA: Leading Corporate Tax Consultants in UAE

AMCA, a renowned Corporate Tax service provider in the UAE, has established its expertise through result-oriented strategies that emphasize tax efficiency. The seasoned team of tax experts at AMCA possesses proven experience and in-depth knowledge of the UAE Corporate Tax laws, thereby delivering strategic tax planning and ensuring tax compliance with ease. These experts are exceptionally skilled in navigating the UAE free zone corporate tax regulations and act as reliable guides for Free zone companies in UAE by helping them ensure compliance with the Corporate Tax.

Contact AMCA’s experts now for Corporate Tax consultancy!