TAXABLE INDIVIDUAL
A taxable individual is either a resident or a non-resident.
Person in Residence
- A resident person is a legal entity incorporated in the state, including a free zone person, or a legal entity of a foreign jurisdiction that is effectively managed and controlled in the state.
- A natural person who operates a business or engages in a business activity in the state.
Non-resident Person
- A non-resident who, in accordance with a cabinet decision, either has a permanent establishment in the state, receives revenue from the state, or has some other connection to the state.
Exempt Individual
Following are some exemptions that are granted automatically, by cabinet decision, or upon application.
- Automatically exempt:
- Governmental entities and those under the jurisdiction of the government, as defined in a cabinet decision that have not yet been made public, are automatically excluded.
- Extractive and non-extractive natural resource firms are exempt upon notification to the Ministry of Finance of the United Arab Emirates.
- Qualifying Public Benefit entities are exempt if they are listed in a cabinet decision that has not yet been made public.
- Exempt, if requested and granted by the Federal Tax Authority (FTA):
- Social security and pension funds, whether public or private.
- Qualifying investment funds.
- Fully owned and managed subsidiaries in the UAE of exempt people.
Qualifying Free Zone Person (QFZP)
A QFZP should meet the following conditions to benefit from the 0% CT rate:
- Maintain adequate substance in the UAE.
- Derives qualifying income (as to be specified in a cabinet decision yet to be made).
- Has not elected to be subject to 9% CT.
- Complies with transfer pricing provisions (as applicable).
QFZP that meet conditions will have to pay tax at the following rates:
- 0% on qualifying income.
- 9% on taxable income that does not meet the qualifying income definition.
QUALIFYING ACTIVITIES
The definition of qualifying activities under Article 2(a) of the Ministerial Decision No. 139 includes the following activities:
- The fabrication of materials or goods.
- The processing of resources or goods.
- Possessing shares and other types of securities.
- Ship ownership, administration, and operation.
- Services for reinsurance.
- Services for fund management.
- Investment and wealth management services.
- Administrative support for affiliated parties.
- Financial and treasury services to connected parties.
- Leasing and financing of airplanes, including their rotating parts and engines.
- Distribution of supplies or products into or out of a specific zone.
- Logistics support.
- Any activities that are related to the above activities.
EXCLUDED ACTIVITIES
The definition of excluded activities is defined under Article 2(a) of the Ministerial Decision No. 139 and includes the following activities:
- Any transactions with natural persons.
- Banking, insurance, finance, and leasing activities.
- Ownership or exploitation of immovable property or intellectual property assets.
DE MINIMIS THRESHOLD
A de minimis applies where the non-qualifying revenue derived by the QFZP does not exceed 5% of the total revenue or AED 5,000,000 (whichever is lower).
Where the non-qualifying income exceeds the de minimis threshold or the QFZP does not satisfy the eligibility conditions of Article 18 of the UAE Corporate Tax law, the free zone person will not be eligible to be treated as a QFZP for the current tax year and the subsequent four (4) tax years.
The implication of this is that all the Taxable Income of the free zone person would be subject to 9% Corporate Tax (on the Taxable Income that exceeds AED 375,000).
BOOK A FREE CONSULTATION
The UAE Corporate Tax is now effective (accounting periods starting on or after 1 June 2023) so businesses should be assessing the impact of the UAE Corporate Tax. There is still time to get your company in order, complete the requirements, identify any gaps, and review compliance processes. Below we have drafted the next steps to ensure your business meets the requirements and standards on time.
- Arrange your Corporate Tax consultation with Creation Business Consultants.
- Our tax team will arrange a Corporate Tax assessment for your UAE business.
CORPORATE TAX – HOW CAN CREATION BUSINESS CONSULTANTS HELP?
As a leading registered corporate service provider with a robust corporate structuring, compliance, and tax team, we can guide you through the complete Corporate Tax formalities to assist with:
- Corporate Tax registration.
- Review of Corporate Tax compliance and identify any gaps.
- Outsource activities or roles to meet substance requirements in the UAE to be treated as a QFZP.
- Corporate Tax return preparation, filing and submission.
There is much work and preparation that needs to be arranged for UAE Corporate Tax. It is best to equip and plan regarding such matters to have a smooth transition for your UAE business operations. For more information on the UAE Corporate Tax implementation guidelines, contact [email protected] or call UAE +971 4 878 6240 for a free consultation with our tax team.
