How new corporate tax effect Free Zone companies in the U.A.E

The corporate tax in the UAE will affect free zone companies in the following ways:

  Qualifying income: Free zone companies that earn qualifying income will be taxed at 0%. Qualifying income is defined as income derived from activities carried out in the free zone, such as manufacturing, trading, and providing services.
  Non-qualifying income: Free zone companies that earn non-qualifying income will be taxed at 9%. Non-qualifying income is defined as income derived from activities carried out outside of the free zone, such as selling goods or services to mainland customers.
    Small business relief: Free zone companies with gross revenue of less than Dh3 million per year may be eligible for small business relief, which means they will not be taxed on their non-qualifying income.

The corporate tax will have a mixed impact on free zone companies. On the one hand, it will increase the cost of doing business for companies that earn non-qualifying income. On the other hand, it will reduce the cost of doing business for companies that earn only qualifying income. The overall impact of the corporate tax on free zone companies will depend on their specific circumstances.

Here are some additional things to keep in mind about the corporate tax and its impact on free zone companies in the UAE:

1.     The corporate tax is a new law, and there is still some uncertainty about how it will be implemented.
2.     The tax authorities have the discretion to interpret the law in a way that could be unfavorable to free zone companies.
3.     Free zone companies should carefully review their business activities to determine whether they are earning qualifying income or non-qualifying income.
4.     Free zone companies should consult with a tax advisor to understand their specific tax obligations under the new law.