Is there a difference between a Designated Zone and a Free Zone?
A Designated Zone has certain additional advantages, in terms of claiming preferential tax regime under the UAE corporate tax law. Such Zone, refers to a Free Zone, which is specifically recognised under the UAE VAT laws as a Designated Zone . The advantage is that income derived by a Designated zone from wholesale distribution of goods or materials are eligible for 0% corporate tax rate provided they are supplied to the following: –
- Domestic UAE businesses ;
- Foreign businesses
However the exemption is not available in case the distribution is done directly to the end consumer, whether located in UAE or outside UAE.
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Free Zone has distinct taxation system based on Qualifying Income and Excluded Income. It is therefore essential to know the kind of income taxable under UAE Corporate Tax Law for Free Zone companies.
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