UAE Corporate Tax (UAE CT) in Freezones

Entities established in a Free Zone that meet the conditions to benefit from the Free Zone CT regime (“Qualifying Free Zone Persons”) will be subject to UAE Corporate Tax (UAE CT) at the following rates:

• 0% on Qualifying Income

• 9% on Taxable Income that does not meet the Qualifying Income definition

What is a Qualifying Free Zone Person?

To be treated as a “Qualifying Free Zone Person”, the Free Zone entity must:

1. Maintain adequate substance in the UAE;
2. Derive “Qualifying Income” as specified in a Cabinet Decision;
3. Comply with transfer pricing rules and maintain the relevant transfer pricing documentation; and
4. Not have made an election to be subject to CT in full.

The Minister may prescribe additional conditions that a Qualifying Free Zone Person must meet.

If a Qualifying Free Zone Person fails to meet any of the conditions, or makes an election to be subject to the regular Corporate Tax regime, they will be subject to the standard rates of Corporate Tax from the beginning of the Tax Period where they failed to meet the conditions.

What is Taxable Income?

The taxable income for a Tax Period is the accounting net profit (or loss) of the business, after making adjustments for certain items as defined in the Corporate Tax Law.

Is the 0% Free Zone CT regime applicable automatically?

A Qualifying Free Zone Person that meets the relevant conditions will be able to benefit from the 0% Free Zone CT regime automatically. However, a Qualifying Free Zone Person can elect not to apply the Free Zone CT regime, but instead be subject to the regular CT regime and rates.

Will a Free Zone entity be required to register and file a UAE CT return?

All Free Zone entities will be required to register and file a CT return, irrespective of whether they are a Qualifying Free Zone Person or not.

Will a different UAE CT treatment apply to entities established in a financial Free Zone?

No. The UAE CT treatment will be the same for all Free Zone entities.