Corporate Tax on UAE Free Zones shall depend on the nature of business activity, carried on by them, and the person, with whom business is carried out income
| Taxability of Free Zones | 0% Tax rate for certain income, but required to register and file Tax return |
| Exempt income | Trading with other Free Zones, Income from overseas operations, financial regulated activities |
| Taxable income | Income from branch in mainland |
| Exemption condition | Adequate substance in the UAE and compliance with regulatory requirements |
Corporate Tax on UAE Free Zones
UAE CT regime will continue to apply tax incentives which are currently offered to the companies and branches in Free Zone, provided : –
- Such entities maintain adequate substance in the UAE
- Such entities comply with all regulatory requirements
However, they will be subject to tax return filing requirements .
What are the Tax rates applicable to UAE Free Zones companies and branches ?
The Tax rates shall be 0% on following : –
- Income earned from transactions with businesses located outside of the UAE ;
- Income from trading with businesses located in the same of any other Free Zone;
- Income from certain regulated financial services directed at foreign markets.
The tax rates for Free Zone entities from transactions with mainland UAE (no mainland branch) shall be 0% only in respect of , ‘passive’ income like interest, royalties , dividends and capital gains from owning shares in mainland UAE companies.
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What are the Tax rates applicable to UAE Free Zones with branches in the mainland UAE ?
A Free Zone company with a UAE mainland branch will be taxed at the regular CT rate on its mainland sourced income. However, benefit of 0% CT rate shall continue to be available on its other income.
What are the UAE CT on transactions between Free Zone Persons and their group companies located in mainland UAE ?
The tax rate on such transaction shall be 0% , but the payments made to the Free Zone Person by a mainland group company will not be a deductible expense for the mainland group company .
Disqualification from 0% tax for Free zone companies
Where the Freezone entity earns any other income from mainland , it will disqualify a Free Zone Person from the 0% CT regime in respect of all their income.
UAE Corporate Tax Public Consultation Document
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