The Corporate Tax Law in the UAE offers a 0% corporate tax rate to Qualifying Free Zone Persons engaged in specific eligible activities, as detailed in Ministerial Decision No. 265 of 2023. These qualifying activities are carried out by a Qualifying Free Zone Person, a juridical entity located in a free zone that adheres to stipulated criteria. Thus, it is advisable for businesses to avail the services of top Tax Consultants in UAE by Corporate Tax UAE to effectively determine taxability and to ensure compliance with the corporate tax law.
Qualifying activities under the Corporate Tax Law
Under the UAE Corporate Tax Law, qualifying activities by a Qualifying Free Zone Person (QFZP) within a free zone must fulfill specific criteria. The following are the new qualifying activities under the Corporate Tax Law in the UAE:
- Fund Management Services:
Managing, investing, or administering funds or asset portfolios for clients.
Qualification depends on the regulation of services by specific authorities such as DFSA, Regulatory Authority (FSRA), or SCA.
- Trading in Qualifying Commodities:
Involves trading agricultural commodities, minerals, metals, and energy, including derivative trading for risk hedging. Permitted in any Free Zone authorized for Corporate Tax, extending beyond Designated Zones.
- Manufacturing of Materials or Goods:
Production of tangible items from raw materials or components. Examples include manufacturing furniture, clothing, or pharmaceuticals within a Designated Zone.
- Processing of Goods or Materials:
Transformation or modification of goods or materials through physical, chemical, or mechanical methods. Examples include processing food, oil, or metals within a Designated Zone.
- Holding of Shares and Other Securities:
Ownership, acquisition, or disposal of shares, bonds, or financial instruments. For example, holding shares of a subsidiary or affiliate within a Designated Zone.
- Ownership, Management, and Operation of Ships:
Acquisition and supervision of vessels for maritime transportation. Example: Owning, managing, and operating cargo or cruise ships within a Designated Zone.
- Reinsurance Services:
Providing insurance coverage to another insurance company. Qualification requires regulation by the UAE Insurance Authority or another competent authority.
- Wealth and Investment Management Services:
Financial advisory services regulated by the UAE Central Bank, SCA, FSRA, or DFSA.
- Headquarter Services to Related Parties:
Offering strategic and operational support in management, administration, finance, legal, human resources, marketing, or IT services to Related Parties.
- Treasury and Financing Services to Related Parties:
Financial management services for Related Parties, including cash and liquidity management, risk assessment, hedging, lending, or capital raising.
- Financing, Leasing of Engines and Rotable Components of Aircraft:
– Providing financial support for aircraft, engines, or rotable components.
- Transferring Goods or Materials within or from a Specified Zone:
– Involves transferring ownership or possession of goods or materials to another entity for resale or preparation for resale within or from a Designated Zone.
Seek the Expert Services of Top Tax Consultants in UAE
Qualifying activities in designated zones cover a range of operations, including manufacturing, processing, trading, ownership, and financial services. Regulated by specific authorities, these activities allow Qualifying Free Zone Persons to operate with various services within the UAE, extending beyond designated zones for corporate tax benefits. Thus, it is advisable for businesses to avail the services of top Tax Consultants in UAE to effectively determine taxability and to ensure compliance with the corporate tax law.