A Freezone person and A Qualifying Freezone person
What does Qualifying Income mean?
The scope of the ‘qualifying income’ will be specified in an upcoming cabinet decision.
Corporate Tax Rate on Qualifying and Non- Qualifying Income
(a) Qualifying Income- 0% Corporate Tax
A Free Zone Person that is a Qualifying Free Zone Person can benefit from a preferential Corporate Tax rate of 0% on their “Qualifying Income” only.
(b) Non -Qualifying Income- 9% Corporate Tax
UAE Tax Reliefs/ transfer losses for Qualifying free zones are not allowed
Article 26 –Transfers within a Qualifying Group
Taxable Persons are regarded as an Exempt Person or a “Qualifying Free Zone Person” are not allowed tax relief on intra-group transfer of assets or liabilities between Taxable Persons that are members of the same Qualifying Group.
Article 27-Business Restructuring Relief
Taxable Persons are regarded as an Exempt Person or a “Qualifying Free Zone Person” are not allowed Business Restructuring Relief
Article 37-40 Transfer of Losses/Tax Group Formation
If a free zone enterprise elects to pay corporate tax at 9 per cent and does not claim tax exemption, they can claim tax losses of their mainland subsidiary by forming a group or by way of transfer of losses, subject to conditions.
Free zone businesses have to decide depending on the structure whether they should avail 0% exemption or to be taxed at 9 per cent.
Ministerial Decision No. 73 of 2023 on Small Business Relief
A “qualifying Free Zone Person” are not eligible for the Small Business Relief.
Alia Noor (FCMA, CIMA, MBA, GCC VAT Comp Dip, Oxford fintech programme, COSO Framework)
Ahmad Alagbari Chartered Accountants