The UAE Ministry of Finance has recently issued two new decisions outlining the primary characteristics of the new Corporate Tax regime that came into effect on June 1.
According to officials from the Ministry of Finance (MoF) in Abu Dhabi, companies operating in free zones can enjoy a tax rate of zero percent on income derived from specific qualifying activities and transactions.
To be eligible for this special rate, a company must be incorporated, established, or registered in a free zone. Additionally, it can benefit from a tax exemption on income earned from transactions with mainland UAE businesses or those in a foreign jurisdiction.
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Qualifying activities include fund, wealth, and investment management services, the manufacture and processing of goods or materials, reinsurance services, the holding of shares and other securities, and the ownership, management, and operation of ships.
Other qualifying activities include services provided by headquarters to related parties, Treasury and financing services provided to related parties, the financing and leasing of aircraft (including engines and rotable components), logistics services, as well as distributions in or from a designated zone that meet the relevant conditions and any ancillary activities related to these.
Businesses looking to benefit from the zero percent rate can contact their free zone authority to confirm whether their free zone is eligible.
According to Younis Al Khoori, Undersecretary of the Ministry of Finance, these corporate tax laws are part of the UAE’s efforts to pursue non-oil growth, diversify its economy, boost its revenue base, and reinvest funds in strategic projects. The new corporate tax regime is expected to help the Arab world’s second-largest economy broaden its revenue base and achieve its economic growth objectives.
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