Corporate_Tax UAE Free Zone 2023- 2024
Corporate Tax in UAE Free Zone
The UAE has more than 40 free zones spread across the seven Emirates. For many years the benefit of establishing a company with 100% foreign ownership made setting up a presence in one of the free zones the number one option for doing business in the UAE.
A free zone is a recognized and defined geographic region within the state that is stated in a Cabinet decision made at the Minister’s request. The UAE, to be specific, the Emirates of Dubai and Abu Dhabi are home to various Free Zones. Most Free Zones influence companies and have seen many multinational as well as small and medium-sized companies registering 100% foreign-owned subsidiaries, not depending on a domestic shareholder.
Most UAE Corporate_Tax 2024 Free Zone companies have been considered vital motives for international trade. Free Zones enjoy umpteen exemptions, such as 100% foreign ownership, 100% customs and VAT exemptions, 100% returns on capital and profits, corporate tax exemptions, etc.
When Will Corporate Tax Be Effective?
As per the Corporate_Tax law in the UAE, Corporate_Tax would be implemented in the country for financial years after June 2023, i.e, 6 months. For instance,
- Businesses with financial year falling between 1st July 2023 and 30 June 30, 2024, would be affected by corporate tax from July 2023
- Businesses whose financial year falls between January 1, 2023, and December 31, 2023, would be affected by corporate tax with effect from January 1, 2024 (being the first financial year starting after June 2023
Corporate Tax Rates for Free Zone Companies
Corporate_Tax rates for Free Zone Persons vary depending on their classification.
- Qualifying Free Zone Person (QFZP): A QFZP may be eligible for specific tax benefits, including a 0% tax rate on qualifying income.
- Non-Qualifying Free Zone Person (NQFZP): NQFZPs do not meet the specific conditions required to attain QFZP status, and consequently, they may not access the same tax benefits.
Three Types of Business Activities for Free Zone Taxability
Under UAE corporate tax regulations, business activities for Free Zone taxability can be categorized into three distinct groups:
- Qualifying Activities: These are specific activities explicitly mentioned in Cabinet Decision No. 139 of 2023. Businesses engaged in these activities may be entitled to tax benefits or exemptions.
- Excluded Activities: A list of activities outlined in the Cabinet Decision that may not qualify for the same tax benefits or exemptions as Qualifying Activities.
- Other Activities: Activities not explicitly mentioned in either the Qualifying or Excluded Activities lists have tax implications determined based on their nature and the relevant tax regulations.
Why was corporate tax introduced in the UAE?
Taxes on business profits were implemented in the UAE for a number of significant reasons. They include:
- To enhance the nation’s standing as a significant hub for commerce and investment.
- To accelerate the transformation and developmental programmes in order to achieve strategic goals
- To address global standards for tax transparency.
- To eliminate bad tax practises from the system.
- To increase its revenue from non-oil sources.
AHG, Top Audit and Chartered Accountants firm in UAE. Corporate Tax is to be withheld from State Sourced Income of UAE businesses in accordance with Article 45 of this Decree-Law.