The Federal Tax Authority (FTA) has released a guide for businesses in free zones, detailing how corporate tax applies to them under the free zone corporate tax regime. This regime allows eligible companies to benefit from a zero percent corporate tax rate on qualifying income.

The guide clarifies the conditions a business must meet to qualify for this rate, the types of activities that are eligible, and those that are not. It also includes examples to help companies understand how corporate tax laws apply.

The guide offers clear explanations on several key aspects of Corporate Tax for Free Zone Persons:

Details how to calculate Corporate Tax, focusing on the determination of Qualifying Income and taxable income eligible for the 9% Corporate Tax rate.

Outlines the conditions that Qualifying Free Zone Persons must meet to maintain adequate substance.

Provides criteria for identifying whether an establishment is a Foreign Permanent Establishment or a Domestic Permanent Establishment.

Explains the treatment of income derived from immovable property and Qualifying Intellectual Property.

Includes an explanation of Qualification and Exclusion of activities, along with the compliance requirements.

The FTA added that profits attributable to a Permanent Establishment, operated by a Qualifying Free Zone Person either within the UAE (outside the Free Zones) or in a foreign country, will be subject to the corporate tax rate of 9%.

The FTA urges all free zone businesses to read the guide to understand all the rules thoroughly. This guide and other relevant tax documents are available on the FTA’s website.