In compliance with the corporate tax system in free zones, which permits eligible individuals based in free zones to benefit from 0% corporation tax on qualified income.
the Federal Tax Authority has released a handbook on the application of corporate tax for persons headquartered in free zones.
Application of corporate tax law
The guide offers general guidelines for applying the corporate tax law to individuals based in free zones. It also summarizes the requirements that an individual based in a free zone must fulfill to be deemed a qualified individual based in a free zone, which enables them to take advantage of the 0% corporate tax application. Additionally, the guide lists the activities that qualify and exclude an individual based in a free zone.
Corporate and resident individual tax law
In order to help businesses better grasp how the key provisions of the corporation tax code relate to individuals based in free zones, the guide also offers a plethora of examples.
How to calculate corporate tax for resident individuals
The guidebook explains how to compute corporate tax for individuals residing in free zones, how to determine eligible income, how much income is subject to 9% taxation, how to maintain a realistic and sufficient presence of eligible individuals in free zones, how to determine a domestic or foreign permanent establishment, how to handle income realized from real estate, how to handle income realized from qualified intellectual property, and more. It also provides a detailed explanation of eligible activities, excluded activities, and tax compliance requirements.
The authority clarified that the profits attributed to a permanent establishment in the United Arab Emirates or another foreign nation, where a qualified individual based in the free zone does business outside the free zones, will be liable to corporate tax at a rate of 9%.
As the guide's author noted, free zones are a vital component of the nation's economy and have a significant impact on both domestic and international economic growth and change.
The authority noted that the executive decisions and guidelines, including the new guidance guide on persons residing in the free zones, can be viewed through the Federal Tax Authority website and urged everyone living in the free zones to read it in its entirety to gain a thorough understanding of the definitions and the relationships between the various rules.
