UAE Corporate Tax: How well can free zone businesses keep tracking ‘qualifying income’?

UAE Corporate Tax: How well can free zone businesses keep tracking ‘qualifying income’?

Let’s give some attention to the recent notice issued by the Ministry of Finance that the public should rely on official publications and trusted sources of information regarding the Corporate Tax law and the associated cabinet and ministerial decisions on free zones. The importance thereof cannot be understated. The scope of free zone tax incentives has numerous subtle points. As taxation is new to the region, a well-researched analysis of tax provisions - factoring substance over form - could alone assist the business owners. Tax advisory is not complete by serving businesses with a mere rewording of the tax provisions without explaining the implications or provide recommendations. Business owners should prefer thorough analysis over verbal discussions to maintain the decision making trail for future audits. Certain critical issues are examined below on the free zone tax incentives. Qualifying Income (QI) – taxable at 0 per cent - includes income derived from distribution of goods or materials in or from a designated zone (DZ) to a non-free zone person who: An evaluation is required if the end-use condition of resale/processing for sale also applies to distribution from DZ to overseas customers. If applicable, how does one ensure compliance and the consequences