Understand the Qualifying Free Zone Person
The Free Zone CT regime is a form of CT relief that allows a Free Zone Person that is a Qualifying Free Zone Person (QFZP) to benefits from a 0 % CT rate on Qualifying Income and 9 % CT rate on non - Qualifying Income.
In order to be a QFZP and benefit from the Free Zone CT regime, a Free Zone Person must met following condition under Federal Decree Law and Ministerial/Cabinet Decisions ;
* Maintains adequate substance in the UAE
* Derives Qualifying Income
* Has not elected to be subject to CT
* Compliance with the Arm's length principle and transfer pricing documentation
* Audited Financial Statements
* Non-qualifying revenues do not exceed the de-minis requirements
if any of the condition are not met the Free Zone Person will not qualify as QFZP for current year and subsequent 4 years.
Qualifying Income of the QFZP shall include the bellow categories of Income, provided that such income not attributable to a Domestic PE or a Foreign PE
a. Income derived from transactions with a Non-Free Zone persons, except for income derived from excluded activities.
b. Income derived from transactions with a Non-Free Zone person, but only in respect of Qualifying activities that are not Excluded Activities.
c. Any other Income provided that the QFZP satisfies the de minimis requirements.
a. any transaction with natural persons, except Qualifying Activities
b. Banking activities subject to regulatory oversight.
c. Insurance activities subject to regulatory oversight.
d. Finance and leasing activities subject to regulatory oversight.
e. Ownership or exploitation of immovable property, other than transaction with Free Zone Commercial Property with other Free Zone person.
f. Ownership or exploitation of intellectual property assets.
g. Any activities that are ancillary to the activities listed above.
a. Manufacturing of goods or materials.
b. Processing of goods or materials.
e. Holding of shares and other securities
f. Ownership, management and operation of ships.
g. Reinsurance services (subject to regulatory oversight)
h. Fund management services (subject to regulatory oversight)
i. Wealth and investment management services (subject to regulatory oversight)
j. Headquarter services to related parties.
k. Treasury and financing services to related parties.
l. Financing and leasing of aircraft, including engines and rotable components.
m. Distribution of goods or materials in or from a Designated Zone to a customer that resells or alters such goods or materials for sales or resale.
n. Logistics services.
o. Any activities that are ancillary to the activities listed above.
De Minimis Requirements
Non qualifying Income derived by the QFZP does not exceed the lower of ; 5% of total revenue or Five million whichever is lower.