What Is Qualifying Income In Corporate Tax For Dubai Free Zones?

Corporate tax percent

The introduction of the corporate tax strives to further solidify the UAE’s position as a top-notch investment and commercial hub. It will also boost the clever aim of transformation and development. Moreover, the income tax in Dubai 2023 fulfills the global standards for tax transparency and prevents harmful tax practices

Under the new regime, companies will be labeled as exempt, taxable, or qualifying free zone persons. Plus, they must assess which category they belong to and register for corporate tax accordingly. Some exempt entities must still apply and obtain approval. 

Below, we will go over these three groups and how they are influenced by the new corporate tax regime.

Who Is Qualifying Free Zone Person (QFZP)

This individual should fulfill the below conditions to take advantage of the 0% Corporate Tax rate:

  • Obeys the transfer pricing provisions as applicable.
  • Maintain sufficient substance in the country.
  • Has not elected to be imposed with the 9% corporate tax rate.
  • Obtains qualifying income (to be mentioned in a cabinet decision yet to be determined)

The qualifying free zone people that meet the above conditions will have to pay tax at these rates:

  • 9% on taxable income that does not fulfill the qualifying income definition 
  • 0% on qualifying income

Bottom Line:

As the UAE introduces corporate tax in 2023, understanding its implications for different entities is vital. From qualifying free zone individuals to taxable persons and exemptions, staying informed is key to exploring this evolving business environment. Adopting these changes equips individuals and businesses to seize opportunities and succeed within the UAE’s new tax framework.

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