UAE: Optimise tax based on the revised free zone decisions

UAE: Optimise tax based on the revised free zone decisions

Published: Sun 5 Nov 2023, 6:14 PM

During the past week, the previously issued Cabinet Decision No. 55 of 2023 and Ministerial Decision No. 139 of 2023 regarding UAE Free zones have been repealed and it has been replaced by newly introduced Cabinet Decision No. 100 of 2023 which focuses on the Qualifying Income (QI) of the Qualifying Free Zone Person (QFZP); and Ministerial Decision No. 265 of 2023 that deals with Qualifying Activities (QA) and Excluded Activities (EA), respectively.

The revised decisions have introduced several new definitions, such as the definition of patent, copyrighted software, Qualifying Intellectual Property (QIP) and Qualifying Trading Commodities (QTC). Additionally, the revised Decisions are now carrying the detailed descriptions of the Qualifying Activities and Excluded Activities. Notably, the new Decisions grant leverage to the QFZP who is generating revenue through the development and exploitation of QIP, as well as through the trading of Qualifying Commodities.

Under the revised decisions, the income derived by the QFZP from the ownership or exploitation of QIP now has the potential to be classified as QI and may be subject to a 0% tax rate. This is a significant departure from the previous repealed Decision where income derived from intellectual property was