UAE introduced a 9% corporate tax rate for the 7 emirates, including Dubai, effective 01 June 2023
In the following Blog we shall be looking at who is subject to tax in UAE and what is the applicable rate on the derived income. This will be analysed at by defining a Taxable Person, what Qualifying Income is subject to zero tax and what are such Qualifying Activities and finally what are the Excluded Activities which are thus taxed at 9%.
A Taxable Person is a:
UAE company/juridical persons (incorporated or effectively managed and controlled in UAE);
Individuals who conduct business in the UAE; and
Non-resident company/juridical persons with a permanent establishment in UAE.
As from 01 June 2023, a:
9% tax applies to Taxable Income that is not Qualifying Income
0% tax applies on Qualifying Income.
Qualifying Income for zero Tax
The following will be treated as Qualifying Income of a Qualifying Free Zone Persons (“QFZP”):
Transaction with a Free Zone person: All revenue, except for the revenue from 'Excluded Activities'.
Transaction with a Non-free Zone person (including person outside the UAE): Only such income that is derived from 'Qualifying Activities' and is not Excluded Activities.
Any other income: Provided it meets the 'De-minimis Requirements' threshold limit of (a) 5% of total revenue or (b) AED 5 million, whichever is lower.
A QFZP must also undertakes its core income-generating activities in a Free Zone and have adequate assets, an adequate number of qualified employees, and incur an adequate amount of operating expenditures and prepares audited financial statements.
The following activities conducted by a QFZP shall be considered Qualifying Activities:
manufacturing of goods or materials;
processing of goods or materials;
holding of shares and other securities;
ownership, management and operation of ships;
reinsurance services that are subject to the regulatory oversight of the competent authority in the UAE;
fund management services that are subject to the regulatory oversight of the competent authority in the UAE;
wealth and investment management services that are subject to the regulatory oversight of the competent authority in the UAE;
headquarter services to related parties;
treasury and financing services to related parties;
financing and leasing of aircraft, including engines and rotatable components;
distribution of goods or materials in or from a “Designated Zone” to a customer that resells such goods or materials, or parts thereof or processes or alters such goods or materials or parts thereof for the purposes of sale or resale;
logistics services; and
any activities that are ancillary to the activities listed in paragraphs (1) to (12) of the above.
The following activities shall be considered Excluded Activities:
any transactions with natural persons, except transactions in relation to the Qualifying Activities specified under paragraphs 4, 6, 7 and 10 of the above section;
banking activities that are subject to the regulatory oversight of the competent authority in the UAE;
insurance activities that are subject to the regulatory oversight of the competent authority in the UAE, other than the activity specified under paragraph 5 of the above section;
finance and leasing activities that are subject to the regulatory oversight of the competent authority in the UAE, other than those specified under paragraphs 9 and 10 of the above section;
ownership or exploitation of immovable property, other than commercial property located in a Free Zone where the transaction in respect of such commercial property is conducted with other Free Zone Persons;
ownership or exploitation of intellectual property assets; and
any activities that are ancillary to the activities listed in paragraphs 1 to 6 above.
For further information please contact Fiduscorp Ltd.:
Mario Buttigieg - CEO
Tel or WhatsApp: 00356 99829824
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