UAE Corporate Tax: Free zone businesses await final details on 0% for processing, distribution

UAE Corporate Tax: Free zone businesses await final details on 0% for processing, distribution

Income from distribution of goods is eligible for the preferential 0 per cent tax rate (subject to conditions) only if the distribution is in or from a designated zone. However, income from processing of goods is eligible for 0 per cent tax rate if the business is based in any free zone.

The latter includes the preparation, treatment, transformation or conversion of goods into another form for further commercial use or sale. International jurisprudence is rife with principles to decide what activities could amount to processing of goods.

Will roasting of coffee beans and sales amount to processing or distribution? Does packing of readymade jackets and trousers into individual suit sets change the form of the goods? Does a scrap dealer dismantling old goods into components, or simply crushing them into multiple pieces, undertake processing or distribution?

Does packing of goods change its form and thereby result in a processing? Are companies that program debit/credit cards (with chips) before selling processing those goods?

The expression ‘preparation’ has caused varied interpretations as to how this alone could change the goods into another form. For free zone businesses contemplating to classify their distribution activities as processing, the wider tax ramifications should be evaluated first before finalising