UAE Corporate Tax: A checklist for qualified free zone persons to adhere

UAE Corporate Tax: A checklist for qualified free zone persons to adhere

‘Special Economic Zones’ are a global phenomenon due to their role as economic growth drivers and for being foreign direct investment facilitators. In the UAE, free zones operate under special decrees. They offer advantages like efficient infrastructure, 100 per cent ownership, repatriation of profits and capital, and tax exemptions. The cherry on top is the zero per cent corporate tax. That said, the corporate tax exemption is conditional - and so it is crucial to understand the dos and don’ts. Concessions to ‘qualified free zone persons’ The ‘qualified free zone persons’ include branches operated by non-residents in free zones, who meet conditions such as: Qualifying income of a QFZP is taxable at 0 per cent, whereas non-qualifying income (including income from excluded activities) within the de minimus limit is taxable at 9 per cent. Interestingly, any income from domestic Permanent Establishment (PE) - a place of business or other forms of presence of a QFZP outside a free zone - and income from immovable property in certain cases is taxable at 9 per cent separately. Both income streams are not considered in the de minimis calculation. The basic exemption threshold of Dh375,000 does not apply to the taxable income of