Corporate Tax Registration for Free Zone Companies in the UAE

What Is Corporate Tax?

Corporate tax means, the amount of profit contribution from an entity or businesses from their profit during the period. UAE is a business country that allows businesses to invest and earn profit without paying any direct taxes to UAE government before June 2023, however, as intention is to be in line with OECD guidelines internationally. UAE introduced corporate tax in June 2023 while adjusting relevant provisions which help still continue to support businesses in their growth within UAE.  The government of UAE still wants to build trust for investors as UAE is the most trustworthy destination in the world. 

If you are a free zone company, this blog will help you understand

1. How corporate tax works for you.
2. If you are eligible for tax benefits.
3. How to register for corporate tax step by step.

Simplify and clarify.

What is a Free Zone Company?

Free zones are special areas in the UAE where businesses can get many benefits, Such as:

• 100% foreign ownership – you don’t need a local partner.
• Tax incentives – no taxes or very low taxes).
• Easy import/export rules.

Examples of such free zones are Jebel Ali Free Zone (JAFZA), Dubai Internet City, Dubai Multi Commodities Center, Dubai Airport Zone and Dubai Silicon Oasis. 

Does a Free Zone Company in the UAE enjoy Corporate Tax Exemption?

Even free zone companies can enjoy exemption from corporate tax at a rate of 0% on “qualifying income”. However, they meet the following criteria: 

• Maintaining adequate economic substance in UAE.
• Deriving an income that is within the “qualifying income” threshold defined by the government of UAE.
• The free zone person must not have elected to be subject to the standard corporate tax rate and rule
• The free zone person must comply with the arm’s length principle.
• The free zone person must maintain audited financial statements.
• Non-qualifying revenue must meet de minimum requirement.

Qualifying Income

The UAE government has set out conditions for this. The different types of qualifying income from doing business with other free zone companies, include;

• Transactions involving Qualifying Activities that are not Excluded,
• Income from the ownership or exploitation of Qualifying Intellectual Property, or
• Other income, provided the Free Zone Person satisfies the de minimis requirements.

Incomes that are not qualified, such as conducting business with mainland UAE companies, may be subject to the regular taxed rate of 9%.

Conditions to Enjoy 0% Tax:

To maintain your tax benefits, your company should:

1. The economic substance rules (actual business activities are necessary within the UAE)
2. Comply with the rules and regulations that govern and regulate by the Federal Tax Authority (FTA).
3. File and declare corporate tax within due dates.

Main Steps to Obtain Corporate Tax

1. Determine Eligibility: In regard to free zones, whether your company can gain tax benefits.
2. Document your Records: Proper documentation of financial records and business activities reports.
3. Approach Federal Tax Authority(FTA): The steps involved in obtaining it, can be sought on FTA’s website.

Why Consult a Corporate Tax Expert?

The law can be tricky to navigate. FAR Consulting Middle East offers professional advice for corporate tax in the UAE free Zone, ensuring your company is compliant.

The benefit of Partnering with FAR Consulting Middle East?

• Expert corporate tax consultants with year of experience.
• Customized solutions for free zone companies.
• Full Full-fledged support for tax registration and compliance.

UAE Corporate Tax for Free Zone Companies: FAQ

Q1; Does the corporate tax apply to all free zone companies?

A; Only companies with non-qualifying income will be charged at standard rates.

Q2; Must I pay corporate tax if I am in a free zone?

A; It depends. If your company earns qualifying income, you may not have to pay corporate tax. However, if your income in non-qualifying, a tax rate of 9% may apply.

Q3; what is qualifying income?

A; Income that meets the criteria under UAE corporate tax regulation.

Q4; What happens if I don’t register my free zone company for corporate tax? 

A; Failure to do so may bring you fines imposed upon you or loss of your tax benefits. It is always good to respect due process for registration so you are always out of such dilemmas.

Q5; Will I find any help to register for corporate tax registration? 

A; Yes, FAR Consulting Middle East will be assisting through the whole process and seeing whether your business will go about following all rules and regulations. 

Conclusion

Free zone companies are required to register for corporate tax in the UAE. The process helps you enjoy a tax benefit while keeping you under the ambit of UAE laws.

If you need guidance, then FAR Consulting Middle East is always here to guide you through the process. Reach out to us today and make your corporate tax journey simplified and hassle-free!