In the UAE, the government recently changed how taxes work for businesses. This landmark decision marks the country’s first initiative into corporate taxation. Also, it aligns with international standards and promotes fiscal sustainability. This change follows global standards and helps the country manage its finances better. Moreover, this new framework differentiates businesses operating on the mainland from those established with designed free zones. Free zone entities and qualifying free zone persons are subject to a corporate tax rate of either 0% or 9% within the designated free zone.
The Free Zone Corporate Tax system is meant to be applicable solely to the income generated from activities conducted exclusively within or from a Free Zone. This is clarified in the definition of 'Qualifying Income,' which encompasses earnings from transactions with other Free Zone entities, along with income from both local and foreign sources arising from the performance of any of the specified 'Qualifying Activities' outlined in the corresponding Ministerial Decision.
To sum it up, the approved 'Qualifying Activities' comprise the production of goods or materials, the processing of goods or materials, holding shares and other securities, owning, managing, and operating ships, providing reinsurance services, offering fund management services under the regulatory oversight of the competent authority in the UAE, and delivering wealth and investment management services under the regulatory oversight of the competent authority in the Qualifying Free Zone Person:
To sum it up, the approved ‘Qualifying Activities’ comprise the production of goods or materials, the processing of goods or materials, holding shares and other securities, owning, managing, and operating ships, providing reinsurance services, offering fund management services under the regulatory oversight of the competent authority in the UAE, and delivering wealth and investment management services under the regulatory oversight of the competent authority in the Qualifying Free Zone Person:
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