What is the Free Zone Corporate Tax regime?
Under the UAE Free Zone Corporate Tax regime, the following company can claim a preferential tax rate of 0% : –
- Free Zone companies ; and
- Free Zone branches
In order to claim this tax rate, the relevant free zone company, or branch is required to meet certain conditions like economic substance, compliance with transfer pricing guidelines, not having elected to be subjected to UAE Corporate Tax etc. Further, such relief is available only in respect of activities, which have been defined as a “Qualifying activity” . In case the relevant activity does not qualify as a “Qualifying activity” , even if the company meets the condition, search non qualifying income would be taxable at 9%.
However, such benefits , unless extended shall expire by the end of the tax incentive period stated in the legislation of the relevant Free Zone
Further one should note that, the benefit claimed by free zone person under the UAE corporate tax law, would equally apply to all the Free Zones in the UAE, unless otherwise stated.
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