Corporate Tax For Free Zone Companies in UAE
Dubai Free Zone Corporate Tax
• Businesses identified as Qualifying Free Zone Persons (QFZPs) have their qualifying income subject to 0% corporate tax. 9% corporation tax is applied to non-qualifying income in the Free Zone; however, there may be alternative exemptions or relief available.
• One of the main draws for businesses is the lack of corporate income tax in the majority of free zones.
• A holding company’s profits from operations carried out inside the free zone are liable to a 0% corporate income tax rate.
• A number of variables affect the tax applicability, such as the kind of free zone, the nature of the activity, and the customer’s location.
Designated Free Zones
• There are two types of UAE free zones: Designated Free Zones or Regular Free Zones.
• Businesses that earn revenues from qualifying activities both inside and outside of designated free zones are eligible for a corporate tax rate of 0%.
• Generally speaking, holding shares or securities of other companies located in the zone, manufacturing, services, and trade of goods are all considered qualifying activities in designated free zones.
• Companies are free to reinvest their profits and grow their operations since income from qualified activities in designated free zones is exempt from corporate income tax.
Regular or Normal Free Zones
• The UAE’s regular free zones have a little different tax structure.
• Businesses that operate in regular free zones are exempt from corporate income tax on earnings made from eligible operations there.
• Nonetheless, different activities, including trading goods, may have different tax rates. The corporate income tax rate is 9% for trading activities from regular free zones to the mainland or outside the United Arab Emirates.
• There is no tax applied if the trading activities are carried out from a designated free zone to a client who resells the items.
Advantages of Starting a Business in Designated Free Zones
Beyond the 0% tax rate on certain activities, running a holding company in a designated free zone can provide a number of advantages. It consists of:
a) Simplicity in doing business.
b) Laws that are business-friendly.
c) Foreign ownership and profit repatriation.
d) Benefits from import duties and customs.
f) Convenience to transportation and logistics centers.
Activities that Qualify
• Producing and handling products or commodities.
• Keeping stocks and other assets.
• Offering associated parties financing services and treasury.
• Services for logistics.
• Finance or lease aircraft, including its engine parts.
• Provide associated parties with head office services.
• Fund, wealth, and investment management services that fall under regulatory supervision in the United Arab Emirates.
• Ship ownership, management, and operation