Ministry of Finance Announces New Decisions relating to Corporate Tax for Free Zone Companies
In a long due clarification, the UAE Ministry of Finance has now issued two decisions i.e., Cabinet Decision No. 55 of 2023 on Determining Qualifying Income and Ministerial Decision No. 139 of 2023 on Qualifying Activities and Excluded Activities, clarifying the taxability of free zone companies and their profits.
In general, Qualifying Income has been defined as income resulting from transactions with other free zone persons as well as income derived from conducting any of the 'Qualifying Activities'. Furthermore, income resulting from Excluded Activities as well as any other income which does not fall within the ambit of Qualifying Income will disqualify the free zone company from exclusion of the 9% corporate income tax, subject to de minimis requirements. The de minimis requirements will stand satisfied in case the non-qualifying revenue earned does not exceed the lower of either 5% of the total revenue or AED 5,000,000.