The UAE Corporate Tax Law states that a free zone person will be taxed at 0% on Qualifying Income and 9% on Taxable Income that is not Qualifying Income. Determining the Qualifying Income requires the Free Zone persons to understand the Qualifying Activities and Excluded Activities under the UAE corporate tax regime. This is critical for free zone persons to determine whether they can enjoy the 0% corporate tax rate in the UAE.
The UAE had earlier released Ministerial Decision No. 139 of 2023 Regarding Qualifying Activities and Excluded Activities. However, this decision has been repealed by Ministerial Decision No. (265) of 2023. Corporate Tax Consultants in Dubai can help businesses accurately interpret and apply the relevant provisions of this Decision.
In this blog, we will discuss the Qualifying and Excluded Activities listed in Ministerial Decision No. (265) of 2023. Read ahead for more insights:
Qualifying Activities under UAE Corporate Tax
The following activities conducted by a Qualifying Free Zone Person will be treated as Qualifying Activities for the purpose of corporate tax in the UAE:
- Manufacturing of goods or materials
- Processing of goods or materials
- Trading of Qualifying Commodities
- Holding of shares and other securities for investment purposes
- Ownership, management and operation of Ships
- Reinsurance Services
- Fund management services
- Wealth and investment management services
- Headquarters services to Related Parties
- Treasury and financing services to Related Parties
- Financing and leasing of aircraft
- Distribution of goods or materials in or from a Designated Zone
- Logistics services
- Activities that are ancillary to the Qualifying Activities
Excluded Activities under UAE Corporate Tax
The following activities will be considered Excluded Activities under the UAE corporate tax regime:
- Transactions with natural persons, except transactions in relation to the Qualifying Activities specified in Ministerial Decision No (265) of 2023
- Banking activities
- Insurance activities, without prejudice to the Qualifying Activities, specified Ministerial Decision No 265 of 2023
- Ownership or exploitation of immovable property, other than Commercial Property located in a Free Zone where the transaction in respect of such Commercial Property is conducted with a Free Zone Person
- Any activity that is ancillary to the Excluded Activities specified in Ministerial Decision No. (265) of 2023
Major Highlight of Decision No 139 of 2023
The key highlight of the new decision is the inclusion of ‘Trading of Qualifying Commodities’, which was not listed in the previous decision. This includes the physical trading activities of Qualifying Commodities and associated derivative trading used to hedge against risks involved in such activities.
Qualifying Commodities are metals, minerals, energy and agriculture commodities that are traded on a Recognised Commodities Exchange Market in raw form. The Decision defines a Recognised Commodities Exchange Market as any commodities exchange market incorporated in the UAE and licensed and regulated by the relevant Competent Authority, or any commodities exchange market established and recognised outside the UAE of equal standing. Corporate tax advisers in Dubai can provide you with further information in this regard.
Hire the Best Corporate Tax Advisers in Dubai, UAE
The release of the Ministerial Decision No. (265) of 2023 is critical for the free zone persons as a new activity has been added to the Qualifying Activities under the UAE corporate tax regime. The new decision allows free zone businesses to have more clarity on the activities eligible for a 0% corporate tax rate. However, it is advisable to take any decision after consulting with the best corporate tax consultants in Dubai.
Availing the services of leading tax experts such as Tax Gian makes the UAE corporate tax compliance process seamless. Tax Gian, a brand of Jitendra Tax Consultants (JTC), is a leading provider of tax advisory services in Dubai, UAE. We have a team of highly qualified tax experts who can guide businesses on all aspects of the UAE corporate tax law including tax registration, formation of tax groups, transfer pricing etc. Call us today to avail yourself of comprehensive corporate tax consulting services in Dubai, UAE.