Issuance of Decisions Impacting Free-Zone Persons

Following the application of the New Federal Corporate Tax Law to taxable persons with respect to financial years commencing from 1 June 2023, the UAE has now issued the eagerly awaited decisions relevant for free zone persons in the UAE (i.e., Cabinet Decision No. 55 of 2023 on Determining Qualifying Income (“Qualifying Income Decision”), and the Ministerial Decision No. 139 of 2023 on Qualifying Activities and Excluded Activities (“Qualifying Activities Decision”).

Previously, we understood from the New Federal Corporate Tax Law that a free zone person which meet certain prescribed conditions to be considered as a “Qualifying Free Zone Person” can benefit from a corporate tax rate of 0% on their “Qualifying Income”.

The Qualifying Income Decision and Qualifying Activities Decisions now provide further clarity on what “Qualifying Income” means and the type of income that would be excluded from being considered “Qualifying Income”.

What do you need to do?

If you are a free zone person, you will need to carefully assess whether your organization satisfies the prescribed conditions in order to benefit from the 0% corporate tax on your “Qualifying Income”.

Further, with the publication of the recent decisions affecting businesses, free zone persons, government and government-controlled entities, public benefit entities, investment funds, pension funds, private and social funds, there is further clarity to effectively assess the impact of the corporate tax on your organization. 

It is essential for you to undertake an in-depth corporate income tax impact analysis to understand the impact of the recent tax publications on your financial and operational structures. This should encompass a comprehensive understanding of the corporate income tax compliance requirements, an evaluation of potential tax risks and impact on your effective tax rate as well as opportunities to optimize your tax position.

How can we help?

As the leading law firm in the Middle East and North Africa and with strong corporate income tax expertise and significant experience of corporate income tax in Middle East region, across all industry sectors, Al Tamimi & Company is well placed to assess the impact of corporate income tax on your organisation and assist you with navigate the evolving tax landscape in the UAE and the Middle East region.

Click here to access an introduction to corporate income tax implementation in UAE and our wider tax offering.

Please do not hesitate to contact Al Tamimi & Company’s Tax team if you require any assistance.