FAQs: Article 18 Qualifying Free Zone Person
Source: https://mof.gov.ae/corporate-tax-faq/
- What UAE CT rates will apply to entities established in a Free Zone?
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 CT at the following rates:
- 0% on Qualifying Income
● 9% on Taxable Income that does not meet the Qualifying Income definition
- 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.
- What is a Qualifying Free Zone Person?
To be treated as a “Qualifying Free Zone Person”, the Free Zone entity must:
Maintain adequate substance in the UAE;
Derive “Qualifying Income” as specified in a Cabinet Decision;
Comply with transfer pricing rules and maintain the relevant transfer pricing documentation; and
Not have made an election to be subject to CT in full.
- Will a Free Zone entity be required to register and file a UAE CT return?
Yes. 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.
- Will Free Zone entities be subject to the global minimum tax (OECD, BEPS Pillar 2) rules?
Qualifying Free Zone entities that are part of a large multinational group are anticipated to be subject to a different CT rate once the Pillar Two rules are embedded into the UAE CT regime.