UAE corporate tax: MoF issues new decisions related to free zones

The UAE Ministry of Finance (MoF) has issued new cabinet decisions related to corporate tax for free zones.

These include Cabinet Decision No 100 of 2023 on ‘Determining Qualifying Income’, as well as Ministerial Decision No 265 of 2023 on ‘Qualifying Activities’ and ‘Excluded Activities’.

With the revised decision, the scope of ‘Qualifying Income’ has been extended to include the amount of qualifying income derived from the ownership or exploitation of ‘Qualifying Intellectual Property’ calculated based on the methodology of the OECD’s modified nexus approach, which is recommneded in Ministerial Decision No 265 of 2023.

Ministerial Decision 265 of 2023 on ‘Qualifying Activities’ and ‘Excluded Activities’ also lists the trading of ‘Qualifying Commodities’ as a ‘Qualifying Activity’, which allows for the free zone zero per cent corporate tax rate to apply to income earned from the physical trading of metals, minerals, energy, and agricultural commodities that are traded on a recognised stock exchange, as well as the associated derivative trading income used to hedge against, the risk of such trading activities.

The Ministerial Decision also explains the intended scope of ‘Qualifying Activities’ and ‘Excluded Activities’, providing clarity and certainty to free zone businesses.

New corporate tax decisions support UAE’s goal to attract FDI

Younis Haji Al Khoori, Under-Secretary of the MoF, said, “Free zones are central to the UAE’s economic growth, attracting foreign direct investment as well as fostering a favourable business environment.

“These new decisions reflect the continued significant role of free zones in the UAE’s economic diversification strategies and commitment to aligning with international taxation standards.

“The certainty of a competitive corporate tax regime and offering a special regime for free zones cements the UAE’s position as a leading global hub for business and investment and drives its sustainable development agenda.”

In recent news, the Federal Tax Authority (FTA) clarified the criteria for determining non-residents subject to corporate tax in the UAE.

The notification clarifies the scenarios that require registration of a non-resident for corporate tax purposes; taxable income and how it is calculated; as well as other requirements for compliance by non-residents subject to the corporate tax law, which took effect on June 1.