Qualifying Activities for UAE Free Zone Corporate Tax (Full List)
Being able to quantify both activities prevent free zones from being used as tax shelter…
Under UAE Corporate tax law, Qualifying Free Zone Persons are subject to a 0% tax rate on qualifying income and 9% on non qualifying income.
The federal corporate tax law seeks to separate the qualifying income earned in order to preserve the incentives without distorting the mainland economy. As a result, the 0% rate applies only to qualifying income (generally from qualifying activities and qualifying transactions), while non-qualifying income is taxed at 9%.
Additionally, taxable persons are given the opportunity to balance competitiveness with real economic activities. The system allows low tax treatment tied to the income generated by businesses involved.
As a rule qualifying income (0%) generally includes:
- Income from transactions with other free zone persons
- Income from permitted qualifying activities as per applicable CT regulation
- Income that is not derived from explicitly stated excluded activities.
Nonqualifying income (9%) generally includes:
- Income from Non-Free Zone (mainland) persons that is not derived from Qualifying Activities (or that falls under Excluded Activities).
- Income from excluded activities
- Certain UAE sourced income that does not meet qualifying conditions
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