[ad_1]
ABU DHABI, 1st June, 2023 (WAM) — The UAE Ministry of Finance has issued two new decisions that together define the main features of the corporate tax regime applicable to legal entities operating outside the UAE free zones.
These include Cabinet Decision No. 55 of 2023 on the determination of qualifying income, and Ministerial Decision No. 139 of 2023 on qualifying activities and excluded activities.
The announcement was made at a press conference attended by the ministry today in the presence of local and international media. Younis Haji Al-Khoori, Undersecretary of the Ministry of Finance, delivered a keynote speech at the opening of the conference, thanking the media for their important role and positive contribution in disseminating corporate tax awareness and accurate information over the past few months.
He touched on the most important aspects of the corporate tax legislation phase, characterized by the issuance of the federal decree on corporate and corporate taxation, followed by relevant cabinet and ministerial decisions.
He emphasized the strategic importance of corporate taxation in supporting the country’s financial and economic sectors. The meeting included a presentation by Shabana Begum, Executive Director of the Tax Policy Department, on the application of corporate tax in free zones, in accordance with the decisions issued in this regard.
The free zone corporate taxation regime applies to “free zone persons”, ie legal persons incorporated or otherwise organized or registered in a free zone.
The free zone corporate tax regime applies only within the defined area of ​​the free zone. Businesses can contact their free zone authority to confirm whether the free zone qualifies for the 0% tax rate.
The Free Zone CT regime is intended to apply only to income derived from activities carried on entirely within or from a Free Zone. This is reflected in the definition of “qualifying income”, which includes income arising from dealings with other free zone persons, as well as domestic and foreign source income arising from carrying out any of the “qualifying activities” listed in the relevant Ministerial Decision.
In summary, “qualifying activities” include the manufacture of goods or materials; processing of goods or materials; holding of shares and other securities; ownership, management and operation of ships; reinsurance services; fund management services regulated by UAE competent authorities; Authority regulated wealth and investment management services.
They also include headquarter services to related parties; capital and financing services to related parties; aircraft financing and leasing, including engines and rotatable parts; logistics services; distribution in or from designated areas subject to relevant criteria; Any activities that are ancillary to the above activities.
Income from certain “excluded activities” will not be considered “qualifying income”, whether from free zone persons or as part of engaging in “qualifying activities”. This includes, subject to certain exceptions, income from transactions with natural persons, income from certain regulated financial services activities, income from intangible assets, and income from real property, other than commercial real property transactions with persons in a free zone located in free zone.
Earning income from “excluded activities” or earning any other income that does not qualify as “qualifying income” will disqualify a free zone person from the regime, subject to minimum requirements. To meet the minimum requirements, free zone persons may not earn more than 5% of their gross income or AED 5,000,000 in disqualified income, whichever is lower.
Income attributable to domestic or foreign permanent establishments of free zone persons and income attributable to immovable property in a free zone not subject to the free zone corporate tax regime will not count towards the minimum threshold. Instead, the related taxable income will be subject to the regular UAE corporate tax regime of 9%.
If the minimum requirements are not met or the free zone person does not continue to meet any other eligibility conditions, the free zone person will no longer be able to benefit from the free zone corporate tax regime for at least five years (5 years. During this period, the free zone person will be considered Ordinary taxpayer and is subject to corporate tax at a rate of 9% on taxable income exceeding AED 375,000.
All Cabinet Decisions and Ministerial Decisions and guidance relating to the Corporations Tax Act can be found on the Treasury website: www.mof.gov.ae.
[ad_2]
Source link