Free Zone Persons Corporate Tax Guide | CTGFZP1

FTA has issued Corporate Tax Guide CTGFZP1 for Free Zone Persons

The Federal Tax Authority (FTA) on May 20, 2024, released the much-awaited corporate tax guide on the Free Zone Persons. Free Zones play an integra role in driving economic growth in the UAE and internationally by offering diversified benefits such as :

• Ease in foreign ownership restrictions;
• Streamlined administrative procedures;
• Sophisticated infrastructure; and
• Developed business communities etc.

This comprehensive guide is designed to help Free Zone Persons (FZPs), including businesses operating in designated Free Zones across the UAE, understand their tax obligations and the conditions needed to benefit from the Free Zone Corporate Tax regime.

Purpose of the Guide

The guide offers general guidance on the applicability of the Corporate Tax Law to Free Zones and Free Zone Persons, covering:

• Qualifying as a QZFP: Conditions that need to be met to be recognized as a Qualifying Free Zone Person (QZFP) and benefit from the 0% Corporate Tax rate.
• Qualifying and Excluded Activities: Bifurcation between Qualifying Activities and Excluded Activities for a QZFP.

Overview

1) This guide addresses some of the most talked about concerns and issues raised by the Public Consultation Paper (PCP) issued in August 2023. Accordingly, we would like to provide insights on some of the key issues:

2) Also, we would like to highlight that this guide brings together all the essential information about Free Zones, which was previously scattered across  Article 18  of the U.A.E. Corporate Tax Law, Ministerial Decision 265 of 2023, and Cabinet Decision 100 of 2023, as well as concepts detailed in the frequently asked questions (FAQs’) issued by the FTA. This guide provides a clear and concise summary of everything you need to know to navigate the Free Zone Corporate Tax regime effectively and that is :

• Requirements for QFZP Status: Being considered a QFZP involves meeting specific criteria laid out by the authorities. The satisfaction of these conditions determines whether a particular business qualifies for beneficial tax treatment within the Free Zone Regime or not.
• Corporate Tax Calculation: For QFZPs, calculating corporate tax involves the income to be categorized into qualifying and non-qualifying, with expenses allocated accordingly using the arm’s length principle.
• Loss of QFZP Status: Maintaining QFZP status is crucial, as failure to meet the set conditions can result in losing the associated tax benefits. This could mean facing the standard corporate tax rate on all income.
• Qualifying and Excluded Activities: Understanding which activities qualify and which are excluded is crucial. This guide provides clarity and illustrative examples to help identify where your business activities fit within the QFZP framework.
• Compliance and Documentation: Being a QFZP requires filing tax returns to keeping meticulous records and undergoing audits, compliance is non-negotiable. Failure to comply can lead to penalties outlined in Cabinet Decision No. 75 of 2023.

Conclusion

In summary, the “Corporate Tax Guide | Free Zone Persons | CTGFZP1” is an essential resource for navigating around the corporate tax regulations as a Free Zone Person in the UAE as it involves understanding and adhering to a specific set of conditions. By ensuring your business meets these criteria, you can take advantage of the preferential tax rates designed to support and encourage economic activity within Free Zones. Keep abreast of the rules, maintain meticulous records, and regularly audit your operations to stay compliant and maximize your tax benefits.

Staying informed and prepared can help you make the most of the opportunities available in the UAE’s dynamic economic environment.

We would be more than happy to assist you further and discuss if and how this affects your company and what are the next steps to take. For understanding more about Corporate Tax, VAT Updates, Tax Law and Registration reach out to us on: info@acme-group.me | +971527972066.

Disclaimer: 
The Content offer general guidance and should not be considered legal, financial, or tax advice. Consult qualified professionals for personalized guidance. While efforts have been made to ensure accuracy, no guarantee is provided for completeness or applicability to individual situations. Users are responsible for their interpretation and actions based on this information, at their own risk.