0% Corporate Tax Benefits Key Consideration

0% Corporate Tax benefits Key considerations

Article 18 of the UAE Federal Decree Law No. 47 of 2022 outlines the conditions that must be fulfilled by a free zone person to be considered as a qualifying free zone and being entitled to claim the 0% tax rate. Below is an overview of the key requirements specified under Article 18 and of the potential consequences for non-fulfilment of the conditions.

Conditions

Ø Maintain Adequate Substance

• Undertake core income-generating activities in the FZ.
• Have adequate assets, expenditures and employees.
• Adequate supervision of activities outsourced to another free zone.

Ø Derives qualifying income

• All incomes earned from another free zone except from excluded activities.
• All income earned from qualifying activities with non-free zone except from excluded activities.
• Any other income subject to the de minimis rule.

Ø Complies with Article 34 & 55

• Article 34 - Arm’s Length Principal
• Article 55 - Transfer Pricing Documentation

Ø Not opted for 9% tax

• Does not voluntarily choose to get taxed at the standard rate of 9%.

Ø Other Condition

• Non-qualifying revenue ≤ De minimis requirement.
• Prepares audited financial statements.

Consequences of failure to meet the conditions

• Ceases to be a FZ person from the beginning of the tax period until 4 subsequent tax periods.
• Subject to the standard CT regime.
• Subject to the standard tax rate of 9%.

How can Crowe help?

• Conduct a comprehensive assessment of business operations, financial structure, activities, ownership and other pertinent factors to determine their eligibility for claiming free zone status and ensuring compliance with the conditions.
• Assist in maintaining accurate documentation and records and regularly monitoring the operations to ensure ongoing adherence to the conditions outlined in the legislation.