PROPOSED UAE CORPORATE TAX LAW FREE ZONE COMPANIES

𝐔𝐀𝐄  𝐂𝐎𝐑𝐏𝐎𝐑𝐀𝐓𝐄 𝐓𝐀𝐗 𝐋𝐀𝐖
𝐅𝐑𝐄𝐄 𝐙𝐎𝐍𝐄 𝐂𝐎𝐌𝐏𝐀𝐍𝐈𝐄𝐒
𝐂𝐎𝐍𝐒𝐔𝐋𝐓𝐀𝐓𝐈𝐎𝐍 𝐃𝐎𝐂𝐔𝐌𝐄𝐍𝐓

UAE Ministry of Finance has released a public consultation document on UAE Corporate Tax (UAE CT) to seek views on its features and implementation.

What is the purpose of a public consultation?
The document contains information on the proposed Corporate Tax (‘CT’) regime and is released for the purposes of obtaining input from interested parties.

Free Zone Persons

CT will be applicable to companies & branches that are registered in a Free Zone (referred to as ‘Free zone persons’) and subject to tax return filing requirements

A Free Zone will be subject to 0% CT

CT regime will continue to honor the CT incentives currently being offered to free zone businesses

• On income earned  from Transactions with business located in same or any other free zone or outside of UAE
• May also apply to income from certain regulated financial services directed at foreign markets.

Exceptions for Free Zones persons who can continue to benefit from 0% CT:

A Free Zone Person that has a branch in mainland UAE -0% CT Rate

• will be taxed at the regular CT rate on its mainland sourced income,
• whilst continuing to benefit from the 0% CT rate on its other income.

A Free Zone Person does not have a branch in mainland UAE-0% CT Rate

• If its income from mainland UAE is limited is ‘passive’ income i.e. (interest, royalties, dividends capital gains from owning shares in mainland UAE companies)

Transactions between Free Zone Persons and their group companies located in mainland UAE-0% CT Rate

• However, payments made to the Free Zone Person by a mainland group company will not be a deductible expense.

Free Zone Person located in a Designated Zone for Value Added Tax (VAT) purpose -0% CT Rate

• On income from the sale of goods to UAE mainland businesses that are the importer of record of those goods.