CORPORATE TAX IN Dubai| FREE ZONE PERSON

 


Corporate Tax In Dubai

Corporate Tax in Dubai, UAE has a number of Free Zones across its various Emirates. Free Zones are known as Economic Zones in some countries and some territories call them Free Trade Zones. In general, these special zones have been created by the government to provide trade benefits and to promote foreign investments.

book appointment

Qualifying Free Zone Person

The main purpose of the creation of Free Zones is to avoid complications in international trade and the duties imposed by customs. There are various other benefits enjoyed by Free Zones in UAE. In this section, we are going to discuss a Free Zone Person from a Corporate Tax point of view and how they are different from other Taxable Persons.

A Juridical Person incorporated, established, or otherwise registered in a Free Zone is called as a Free Zone Person. It also includes a branch of a Non-Resident Person registered in a Free Zone. Free Zone Persons eligible for Zero percent (0%) Corporate Tax on their income are known as Qualifying Free Zone Persons.

Article 18 of the Decree-law states that Qualifying Free Zone Person is a Free Zone Person that meets all the conditions mentioned below:

1. Maintains adequate substance in UAE.

The company must have a physical presence in Free Zone rather than in just papers. There is no clarity with respect to ‘adequate substance’ in the Decree Law. However, it usually means a physical office with an adequate number of employees and physical assets in the state.

2. Comply with UAE Transfer Pricing Provisions.

Free Zone Persons are required to comply with the Transfer Pricing provisions under Article 34 and Article 55 of the Decree Law and this will be covered in the topic ‘Transfer Pricing’ in detail.

3. Derives Qualifying Income as specified in cabinet decision.

Federal Tax Authority has not defined the ‘Qualifying Income’ in the Decree Law. The cabinet decision regarding the Qualifying Income is expected in the coming days.Visit Us

Visit Us for More Details

4. Has not elected to be subject to Corporate Tax.

Free Zone Persons have the option to be taxed at standard Corporate Tax rates if they make an election as discussed under Article 19. The person has to make sure that no such election has been made, in order to get the preferential rate of 0%.

A Qualifying Free Zone Person who fails to meet any of the above conditions during a financial year shall cease to be a Qualifying Free Zone Person and as a result, they are subject

to Corporate Tax at a standard rate (i.e. 9%) like any other taxable person from the beginning of the financial year in which the person fails to meet the conditions.Visit Us

Moreover, Free Zone Persons are subject to normal Corporate Tax rates, when the person at his own will makes the election as per Article 19. As a result of the election, all the income of a Free Zone Person would be taxed at the standard rate of 9%. The election shall be effective from either the commencement of the Tax Period in which the election is made or the commencement of the following Tax Period.

Contact Us now for More Details OR Visit Us

Location: Dubai - United Arab Emirates

Comments

Post a Comment

Popular posts from this blog

GoAML Registration in the UAE

Image
    It is the basic legislative framework that criminalizes money laundering and terrorist financing operations and capitalizes on the effectiveness of the legal and institutional framework in the implementation of procedures and measures that contribute to anti-money laundering efforts and combating the financing of terrorism and illegal organizations. GoAML is a software, designed as a solution against terrorism financing, money laundering, and other misuses of financial means, developed specifically for FIU. It is important to note that GoAML is governed by the Ministry of Economy (MOE) of the UAE which, in turn, reserves the right to conduct enhanced audits of the entities. This falls under the scope of applicability of this regulation. Such audits may include: AML/CFT Policies and Procedures Internal risk assessments Periodical AML/CFT reports Red flags policies on suspicious transactions PEP identification protocols The software was first developed by   the Un...
Read more

CORPORATE TAX IN UAE – AN INTRODUCTION

Image
CORPORATE TAX IN UAE – AN INTRODUCTION  On 9th December 2022, UAE has released the much-awaited Federal Decree Law No. 47 of 2022 on the taxation of corporations and Other Businesses. The Corporate Tax Law will be effective from 1 June 2023 with a headline rate of 9%. This is the first time a direct tax being implemented in UAE. Unlike Value Added Tax and Excise Tax, Corporate Tax will directly impact the profitability of a business. The new corporate tax regime includes features that represent best practices in international taxation. Here we provide a brief about Corporate Tax and the rationale behind the introduction of Corporate Tax by UAE. What is Corporate Tax Corporate Tax is a direct tax levied on net income or profit of corporations and other businesses. The corporate tax will be payable on the profits of UAE businesses as reported in their financial statements prepared in accordance with internationally accepted accounting standards. Although the net income is the base, t...
Read more

Starting a business in The UAE

Image
  Starting a business in the UAE is an exciting opportunity. As the country continues to grow, so too does the emergence of entrepreneurs looking to establish their own business. There are many factors to consider when taking this path, and I'm here to guide you through the necessary steps. The first step is to decide on what type of business you’d like to set up and where you’d like to incorporate it. The UAE has a wealth of options including abroad company branches, free zones, and onshore companies. Different types of businesses offer different advantages and disadvantages so it’s important to review the options available before deciding what type of company to setup. Read More Once you’ve decided on the company type, you must then consider the process for establishing it. This will differ based on setting up the company offshore or in a free zone but should typically include anything from choosing and reserving a company name, submitting all necessary documents and applicatio...
Read more