Tax Update: Four-Step Walkthrough To Identify Your Potential CT Implications For Your Free Zone Entity
On June 1, the Ministry of Finance (MoF) provided clarity to the tax implications on the Qualifying Income of a Free Zone Entity (FZE) through Cabinet Decision No. 55 and Ministerial Decision No. 139.
In summary, a Qualifying Free Zone Entity can apply a 0% CT rate to a Qualifying Income, limited to transactions listed below:
- with other free zone entities except for activities that are listed as Excluded Activities;
- with other persons (mainland and non-residents) from activities that are listed as Qualifying Activities;
- Any other income provided de minimis requirements are met.
The de minimis requirement is considered met if the Non- Qualifying Income of a taxpayer does not exceed the lower of below:
- 5% of Total Revenues
- AED 5,000,000
With all the new rulings, UAE Free Zone Entities are increasingly puzzled about their future CT obligations. To ease the complexity, we have prepared a simple four-step walkthrough to identify your potential CT implications for your Free Zone Entity.
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