Federal Tax Authority Issues Corporate Tax Guide on Free Zone Persons
The Federal Tax Authority (FTA) has released an extensive guide detailing the application of Corporate Tax to Free Zone Persons under the Free Zone Corporate Tax regime. This regime permits Qualifying Free Zone Persons to benefit from a 0% Corporate Tax rate on their Qualifying Income.
The guide provides thorough insights into the Corporate Tax Law as it pertains to Free Zone Persons, outlining the necessary conditions for a Free Zone Person to qualify for the 0% Corporate Tax rate. It also elaborates on the activities classified as Qualifying Activities and Excluded Activities for these entities.
To aid businesses in comprehending the key elements of the Corporate Tax Law, the guide includes numerous examples. It explains the calculation of Corporate Tax for Free Zone Persons, the determination of Qualifying Income, and the identification of taxable income subject to the standard 9% Corporate Tax rate.
Furthermore, the guide addresses the requirements for maintaining adequate substance for Qualifying Free Zone Persons, criteria for identifying a Foreign Permanent Establishment or a Domestic Permanent Establishment, and the treatment of income from immovable property and Qualifying Intellectual Property. Detailed explanations of Qualifying Activities, Excluded Activities, and compliance requirements are also provided.
The FTA emphasizes that profits attributable to a Permanent Establishment of a Qualifying Free Zone Person, whether in the UAE (outside the Free Zones) or abroad, will be subject to the 9% Corporate Tax rate.
Highlighting the critical role of Free Zones in the UAE economy, the FTA noted that these zones are pivotal for economic growth and transformation. Free Zones offer various benefits, including relaxed foreign ownership restrictions, streamlined administrative processes, modern infrastructure, robust business communities, and a wide range of legal entity forms and commercial activities.
The FTA urged all Free Zone Persons to thoroughly review the guide for a complete understanding of the various definitions and rules. The guide, along with other Corporate Tax implementing decisions and additional resources, is available on the FTA’s official website.
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