On 9 December 2022, the UAE Ministry of
Finance (MoF) released the UAE
Corporate Tax (CT) law, which is
applicable from the financial year
commencing on or after 1 June 2023.
Under the CT law, a Free Zone Person is
considered a taxable person. However, a
Qualifying Free Zone Person (QFZP) is
eligible for a 0% CT rate if it fulfills
specified conditions, which inter-alia
include:
- Maintains adequate substance in the
Free Zone - Derives Qualifying Income
- Has not elected to be subject to CT
- Transacts with related parties at Arm’s
Length Price (ALP) - Conducts audit of its books of
accounts - Meets de minimis requirements.
Furthermore, Cabinet Decision No. 100 of
2023 and Ministerial Decision No. 265 of
2023 were issued, clarifying various
aspects, including coverage of Qualifying
Income.
While this guidance was available, there
were still certain open areas and
questions that needed clarification to
determine the taxability of Free Zone
Companies.
In view of the same, on 20 May 2024, the
Federal Tax Authority (FTA) issued a
comprehensive CT Guide on Free Zone
Persons, addressing some of the
important issues.