Federal Tax Authority releases corporate tax guide for Free Zone individuals – Business – Economy and Finance

The Federal Tax Authority (FTA) has recently issued a comprehensive guide on the application of Corporate Tax to Free Zone Persons in line with the Free Zone Corporate Tax regime. This guide aims to provide clarity and guidance to Qualifying Free Zone Persons who are eligible to benefit from a 0% Corporate Tax rate on their Qualifying Income.

The guide outlines the conditions that must be met for a Free Zone Person to be considered a Qualifying Free Zone Person and enjoy the 0% Corporate Tax rate. It also defines Qualifying Activities and Excluded Activities for these entities, providing examples to help businesses understand the key elements of the Corporate Tax Law as it applies to Free Zone Persons.

One of the key aspects covered in the guide is the calculation of Corporate Tax for Free Zone Persons, including the determination of Qualifying Income and taxable income subject to the 9% Corporate Tax rate. It also addresses the importance of maintaining adequate substance for Qualifying Free Zone Persons and provides criteria for determining Permanent Establishments, both foreign and domestic.

The FTA emphasized the significance of Free Zones in the UAE economy, highlighting their role in driving economic growth and transformation both locally and internationally. Free Zones offer businesses various benefits such as relaxed foreign ownership restrictions, streamlined administrative procedures, modern infrastructure, and access to diverse business communities.

In a press statement, the FTA urged all Free Zone Persons to carefully review the guide to gain a thorough understanding of the rules and definitions. The guide, along with other Corporate Tax implementing decisions, is available on the FTA’s website for reference.

The FTA also noted that profits attributable to Permanent Establishments operated by Qualifying Free Zone Persons outside Free Zones or in foreign countries will be subject to the 9% Corporate Tax rate. This highlights the importance of understanding the tax implications for businesses operating both within and outside Free Zones.

Overall, the issuance of this guide by the FTA is a significant step towards providing clarity and guidance to businesses operating in Free Zones. By outlining the application of Corporate Tax to Free Zone Persons, the FTA aims to support businesses in complying with tax regulations and maximizing their benefits under the Free Zone Corporate Tax regime. Businesses are encouraged to leverage this guide to ensure compliance and optimize their tax obligations within the UAE.