On UAE Corporate Tax, free zone businesses await final word on ‘qualifying income’

On UAE Corporate Tax, free zone businesses await final word on ‘qualifying income’

Dubai: With registrations having opened for UAE’s corporate tax compliance, free zone based businesses and their owners are awaiting clarification on ’qualifying income’ for ‘free zone persons’. The Federal Decree Law stipulates free zone persons could benefit from a 0 per cent UAE Corporate Tax on the qualifying income. “The qualifying income is to be defined in a separate Cabinet decision,” said Raju Menon, Chairman and Managing Director at the audit consultancy Kreston Menon. Based on available guidance from the UAE Ministry of Finance, the qualifying income ‘should include offshore as well as onshore sources of income of free zone persons subject to strict conditions,” said Menon. “Hence, there should be detailed guidance forthcoming on this aspect.” Under the UAE CT law, free zone persons without an onshore base can transact with companies operating on the mainland. In such cases, the free zone person can benefit from 0 per cent corporate tax rate, provided the 'income from the UAE mainland is limited to passive income'. The countdown has started on the process that will eventually lead to businesses in the UAE coming under a 9 per cent corporate tax regime from mid-2023. The tax rate, announced last year, ensures the