UAE Ministry of Finance Unveils New Corporate Tax Decisions for Free Zones

Dubai, UAE – [03 November 2023]

The UAE Ministry of Finance has issued a set of new decisions that outline the corporate tax regime applicable to juridical persons operating out of free zones in the UAE. These decisions, Cabinet Decision No. 100 of 2023 on Determining Qualifying Income and Ministerial Decision No. 265 of 2023 on Qualifying Activities and Excluded Activities, aim to enhance the attractiveness of free zones as business hubs and further strengthen the UAE's position as a global investment destination.

Key Highlights of the New Decisions

The new decisions introduce several key changes to the corporate tax regime for free zones, including:

• Expanded scope of Qualifying Income: The scope of Qualifying Income has been expanded to include the amount of Qualifying Income derived from the ownership or exploitation of Qualifying Intellectual Property.

• Recognition of Qualifying Commodities Trading: The trading of Qualifying Commodities, such as metals, minerals, energy, and agricultural commodities traded on a recognized stock exchange, has been recognized as a Qualifying Activity, allowing for the application of the 0% corporate tax rate.

• Enhanced Clarity on Qualifying Activities and Excluded Activities: The Ministerial Decision provides greater clarity on the scope of Qualifying Activities and Excluded Activities, offering more certainty for free zone businesses.

Impact on Businesses

The new decisions are expected to have a positive impact on businesses operating in free zones in the UAE. The expanded scope of Qualifying Income and the recognition of Qualifying Commodities Trading will provide tax relief to businesses engaged in these activities. Additionally, the enhanced clarity on Qualifying Activities and Excluded Activities will provide greater certainty for businesses, making it easier for them to plan and operate in the UAE.

The UAE Ministry of Finance has emphasized that the new decisions are aligned with international taxation standards and reflect the UAE's commitment to maintaining a competitive business environment. The decisions are expected to further strengthen the UAE's position as a leading global hub for business and investment.

The UAE's new corporate tax decisions for free zones are a significant step forward in enhancing the country's attractiveness as a business and investment destination. The expanded scope of Qualifying Income, the recognition of Qualifying Commodities Trading, and the enhanced clarity on Qualifying Activities and Excluded Activities are all positive developments that will benefit businesses operating in free zones. With these decisions, the UAE reaffirms its commitment to providing a supportive environment for businesses to thrive and contribute to the country's economic growth.