The 0% Corporate Tax section is applicable to Free Zone people who derive their income from transactions made with the other Free Zone or non-Free Zone individuals, provided that the source of income is not in the list of ‘excluded activities which is provided from the UAE Governing Authority. Anyone who is paying no corporate tax can claim qualified income for the same which is known as the qualified income person (QIP). The QIPs must satisfy certain requirements to be eligible to bypass the UAE corporate tax requirement. The first step is corporate tax registration, a complete guide is provided by ebs Chartered Accountants how to register for corporate tax UAE. Once UAE corporate tax registration is done it becomes clear what category do you fall in.
Qualifying Income in the Free Zones
The UAE is home to around 44 Free Zones that are comprised of businesses and individuals that do business only within the Free Zones but also outside of the country. This is a great opportunity for those looking to make a decent income through transactions and businesses without losing a large portion of it to taxes unlike many countries.
For Free Zone Qualifying Income Persons (QIPs):
Qualifying income is specifically referring to the income derived by activities that are considered “qualifying for tax exemption at 0” from the federal government. These include manufacturing trading as well as holding securities, headquartering and other activities that are mentioned as government-issued documents.
QIPs can enjoy an 0% corporate tax rate on qualifying income. However, income earned from “excluded activities” such as insurance, banking, and leasing and finance don’t qualify as Qualifying Income.
In addition, QIPs must comply with “de minims” rules. That means the revenue earned from non-qualifying sources cannot exceed a specific percent of their total earnings.
Qualifying income can be defined as income earned through transactions with others Free Zone persons- provided it’s not derived from an activity that is excluded.
It also includes the income derived from transactions made with non-free zone individuals (domestic and foreign) but only in the case of Qualifying Activities.
Qualifying income can also include any other case in which you meet the De Minimis criteria is met.
The De Minimis Requirement
This rule allows Free Zone companies earn a tiny portion of income that is tax-free without losing tax advantages.
You could have a portion of income that is tax-free if it is within two limitations:
Limit 1: It should not exceed AED 5 million.
Limit 2: The amount should not exceed five percent of your overall earnings.
Qualifying Activities Under the Umbrella of Qualifying Income
In addition to in addition to the De Minimis requirement, there are “activities” which are outlined in government documents. Government documents that allow you to be eligible to benefit from the zero corporate tax rate. In essence, they are transactions that involve Non-Free Zone Persons but only if they satisfy certain conditions, such as:
- Making or processing things.
- Assets that you manage or own.
- Moving things around.
- Providing special services.
Providing Services:
Share the risk, spread your burden. Reinsurance is an effective way to protect the financial security of your future.
Help others increase their wealth by assisting them with fund Management and Wealth Management can be your key to the tax-free financial success you deserve.
Control all your international operations in UAE Headquarter services for your affiliated parties finished and done with without tax issues.
Treasury and financing services for related parties. It’s a win-win for everyone.
Get your plane flying with tax-free deals on financing and leasing engines, aircrafts and parts – soar to the skies without tax-related turbulence.
Aside from that, any other activities – any or small-scale activity that helps to support one of the above will automatically fall under the tax-free category.
For more information on corporate tax services in UAE you should consider hiring professionals. ebs Chartered Accountants being the number one. They are always available for their clients to help with their registration of corporate tax and other formalities, other than this an online platform uaetaxgpt.ae is providing the most accurate information on corporate tax and its changes.
FAQs
What is a qualifying free zone person?
A qualifying free zone person is a business entity that maintains sufficient substance, generates Cabinet-specified income, adheres to transfer pricing rules, and maintains the relevant documents.
What is qualifying income?
Whether domestic or foreign, income related to a PE is not included in the Total Revenue calculation, qualifying income encompasses earnings from transactions within Free Zones, barring those from Excluded Activities and from dealings with Non-Free Zone Persons that involve Qualifying Activities.
What is free zone status?
Free economic zones (FEZ), free economic territories (FETs) or free zones (FZ) are a class of special economic zone (SEZ) designated by the trade and commerce administrations of various countries. The term is used to designate areas in which companies are taxed very lightly or not at all to encourage economic activity.
