Abu Dhabi: The Federal Tax Authority (FTA) has released a comprehensive guide detailing the application of Corporate Tax to Free Zone Persons under the Free Zone Corporate Tax regime, allowing Qualifying Free Zone Persons to benefit from a 0% Corporate Tax rate on Qualifying Income.
The guide provides a guide on the Corporate Tax Law to Free Zone Persons application, with an overview of the conditions that must be met for a Free Zone Person to be considered a Qualifying Free Zone Person, thus eligible for the 0% Corporate Tax rate. It outlines the activities classified as Qualifying Activities and Excluded Activities for a Qualifying Free Zone Person.
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To assist businesses, the guide includes numerous examples illustrating how the key elements of the Corporate Tax Law apply to Free Zone Persons. It covers the calculation of Corporate Tax, determination of Qualifying Income, and the computation of taxable income subject to the 9% Corporate Tax rate.
Additionally, it explains the requirements for maintaining adequate substance for Qualifying Free Zone Persons and the criteria for identifying a Foreign Permanent Establishment or a Domestic Permanent Establishment. The guide also addresses the treatment of income from immovable property and Qualifying Intellectual Property. It includes a thorough explanation of Qualifying Activities, Excluded Activities and compliance requirements.
The FTA clarified that if a Qualifying Free Zone Person operates through a Permanent Establishment in the UAE (outside the Free Zones) or in a foreign country, the profits from such Permanent Establishment will be subject to the 9% Corporate Tax rate.
Emphasizing the importance of Free Zones, the FTA highlighted that they are integral to the UAE’s economy, driving economic growth and transformation both in the UAE and internationally. Free Zones offer numerous benefits, including relaxed foreign ownership restrictions, streamlined administrative procedures, advanced infrastructure, developed business communities, and additional legal entity forms and commercial activities.
In a press statement, the FTA urged all Free Zone Persons to thoroughly review the guide to fully understand the definitions and interactions of the various rules. It also noted that the Corporate Tax implementing decisions and guides, including the new guide on Free Zone Persons, are available on the FTA’s website.
Federal Tax Authority corporate Free Zone Persons
