Are UAE free zone companies exempt from corporate tax?

Are UAE free zone companies exempt from corporate tax?

The FZ companies will need robust accounting records for allocating expenses and determine net income from each of the above transaction streams.

By Pankaj Jain Published: Sat 30 Apr 2022, 3:45 PM Last updated: Sat 30 Apr 2022, 3:48 PM

On Thursday, the UAE Ministry of Finance (MoF) released a Public Consultation Document on UAE Corporate Tax. Here are some key questions answered by our expert.

Are free zone companies eligible for 0 per cent corporate tax?

Income earned from the following transactions is likely to benefit from 0 per cent CT:

*Transactions with businesses located outside UAE.

*Trading with businesses located in the same or any other free zone.

*Certain regulated financial services directed at foreign market sale of goods (from VAT Designated Zones) to customers in mainland if the customers are the importer-on-record.

Additionally, the following incomes should also be eligible for 0 per cent CT:

‘Passive income’ of the FZ company which does not have any branch in mainland. ‘Passive income’ will include interest and royalties, dividends and capital gains from owning shares in mainland UAE companies. Income from transactions with group companies located in mainland UAE. However, such payments/expense by mainland group companies to FZ company will not be allowed as a deductible expense.

All other