TABLE OF CONTENTS
Free Zone persons means companies and branches registered in a UAE Free Zone
Various free zones have offered a corporate tax-free, business-friendly environment to Free Zone Persons. Many companies were set up in Free Zones to avail of these tax-free benefits. Businesses have invested large capital and committed their time and resources to scale up the business.
Now that the UAE is introducing corporate taxes:
These were the questions bothering the investors of the Free Zone companies.
Here is our attempt to help you understand the new tax laws proposed to be introduced soon
The UAE's Ministry of Finance has released a public consultation document. The document contains information and primary aspects of the proposed UAE CT regime. The purpose of the document is to seek the views and comments of business communities and other interested parties. Interested people may provide their comments on or before 19 May 2022.
According to the Ministry of Finance, the UAE CT regime will honor the tax incentives offered to the Free Zone Persons. With conditions.
No, a free zone person is not exempt from UAE CT.
However, a Free Zone Person is subject to a 0% CT rate. To get these benefits the Free Zone Person must meet certain conditions. The conditions are:
To avail 0% rate, a Free Zone Person must maintain proper books of accounts, systems, and controls and prepare Annual financials statements to properly arrive at the accounting income. The below three scenarios helps to understand the taxability.
0% CT rate will be applicable for Free Zone Person for the income earned from the following activities.
Key requirement: The Free Zone Person must maintain proper books of accounts for its UAE mainland branch.
Yes the following are the other conditions:
Many businesses in the UAE operate multiple branches/subsidiaries. Some in the Free Zones and some more in Mainland. To conduct business both within and outside of the UAE. Inter-company transactions between these companies are common.
Now is the time for a Free Zone Person to review and evaluate their commercial activity and transactions. Even insignificant transactions may have an unwarranted impact on the tax liability.
Secondly, businesses may have to reconsider their ownership structure. To take advantage of benefits such as loss carry forward, intra-group of assets transfers.
Have a say in how the UAE Corporate Tax laws should be - submit your comments and learn more about the new CT Law.
All the answers on Tax loss carry forward under the new Corporate Tax Law.
Calculating your tax liability under the Corporate Tax Law
Are companies in UAE Free Zones subject to Corporate taxes?
The Corporate Tax Law is a Federal Law that will apply to all businesses and commercial activities(legal entities)in the UAE. Find out more.