Corporate Tax Alert: Taxability of Free Zone Persons

As per the UAE Corporate Tax Law (‘UAE CT Law’), a Qualifying Free Zone Person (‘QFZP’) would be taxed at the following rates: 0% on its qualifying income; and 9% on its taxable income that is not qualifying income.

Subsequently, Cabinet Decision No. 55 of 2023 and Ministerial Decision No. 139 of 2023 (collectively referred as ‘erstwhile FZ Decisions’) were released, which dealt with aspects related to determination of qualifying income for a QFZP and what activities will be considered as qualifying activities and excluded activities.

The Ministry of Finance (‘MOF’), thereafter, released a consultation paper (‘PCD on FZ’) on the application of corporate tax on free zone entities and to seek views and obtain inputs on aspects related qualifying activities and excluded activities along with certain illustrations.

Pursuant to the PCD on FZ, the MOF has released new implementing decisions related to Free Zone - Cabinet Decision No. 100 of 2023 and Ministerial Decision No. 265 of 2023 (collectively referred as ‘updated FZ Decisions’). The updated FZ Decisions are effective from 1 June 2023 onwards and the erstwhile FZ Decisions have been repealed as a result.

We have summarized the key updates in the updated FZ Decisions in this document.