UAE Corporate Tax is generally applicable to Free Zone entities as well. However, the UAE Corporate Tax regime will honor the Tax Incentives currently being offered to the Free Zone Entities if it satisfies the following two conditions:
The Ministry of Finance released the public consultation document on the proposed UAE Corporate Tax on 28th April 2022. As per this Public Consultation Document, Companies or branches registered in the Free Zones are known as Free Zone Persons (FZP) as per this document. Such Free Zone persons will be within the scope of the new UAE Corporate Tax and are required to file their Tax Return annually.
This article describes our understanding of the applicability of Corporate Tax for the entities registered in Free Zones in the UAE based on the information available in this public document.
To summarize, it is time to review the existing business models and organizational legal structure for those who are having any business in the Free Zone. Further to optimize the tax benefit, it is important for a business that is registered on the mainland but has business overseas as well. You may have to check whether separating your business activities between the mainland and the Free Zone will result in any tax benefits.
Even though the UAE Corporate Tax is effective from the financial year starting on or after 1st June 2023, Tax planning to ensure the compliance of the law must be done now itself.
Emirates Chartered Accountants Group is committed to delivering and freely explaining the implications of the introduction of Corporate Tax on your business. We hope our efforts to update you on the key developments in the region would help you to make an informed decision in your business.
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