Are Free Zone Companies Free from UAE Corporate Tax?

Recently the UAE Authorities, to align themselves with the Organization for Economic Cooperation and Development (OECD) principles, introduced and implemented the UAE Corporate Tax law from 1 June 2023.

To decode its possible effect and implications, speakers Lokesh Gupta, Associate Director, Tax and Transfer Pricing, and Nishit Parikh, Director, International Tax and MA Tax, provided a detailed overview of the recent announcement.

To accentuate, Lokesh Gupta covered the important free zone taxation updates with their possible impact and elaborated in-depth about the conditions for free zone companies to qualify as free zone companies. He also stated the additional requirements for businesses to enjoy 0% Corporate Tax. Besides this, Lokesh emphasized the importance of Maintaining Adequate Substance and covered the significance of the three associated pillars alongside it.

Furthermore, he defined the Outsourcing Arrangements and the changes brought in the outsourcing activities while stating which activities can be outsourced and which not.

Further, Nishit Parikh spoke in length about the Qualifying Income. He highlighted the change induced through the UAE Cabinet Decision, like how the UAE Authorities have changed their approach from “Source Base to Activity Base.” He then described the critical conditions of the Qualifying Income category as per decision no. 55 of 2023. Nishit also drew attention to a broad list of Qualifying and Non-Qualifying Activities.

Moreover, the speakers provided a detailed overview and summary of the Taxation of a Free Zone Person and shared vital guidelines for Free Zone Entities.