FAQs: Article 18 Qualifying Free Zone Person

Source: https://mof.gov.ae/corporate-tax-faq/

  1. 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
  1. 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.

  1. 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.

  1. 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.

  1. 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.

  1. 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.

 

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