What is Qualifying Income in UAE Corporate Tax?


With the implementation of Corporate Tax in the UAE from 1st June, businesses need to be aware of the different regulations, especially for UAE Free Zones. Alliance Prime Accounting & Tax Consultancy aims to provide clarity on Corporate Tax in Free Zones and the concept of Qualifying Income for Free Zone individuals.

Corporate Tax in Free Zones and Qualifying Income

Free Zone businesses can benefit from a 0% corporate tax rate, but they must meet specific criteria to qualify as a Qualifying Free Zone Person (QFZP). To be eligible as a QFZP, certain conditions from the federal decree law of corporate tax must be met, including generating revenue that falls under the category of Qualifying Income.

Qualifying Income – Definition and Determination

Qualifying Income refers to any income earned by a Qualifying Free Zone Person subject to a 0% Corporate Tax Rate. This income is derived from qualifying business activities or transactions conducted within the Qualifying Free Zone.

Criteria for Determining Qualifying Income

As per Cabinet Decision No. 55 of 2023, the following criteria determine the Qualifying Income for a Qualifying Free Zone Person:

  • Income from transactions with other Free Zone Persons, excluding income from excluded activities.
  • Income from transactions with Non-Free Zone individuals, limited to qualifying activities that are not excluded activities.
  • Other income, where the Qualifying Free Zone individual fulfills the De Minimis requirements.
  • Income from transactions with a Free Zone Person where that person is the Beneficial Recipient of the relevant services or goods.
  • Understanding Beneficial Recipient
  • A Beneficial Recipient is a person who has the right to use and enjoy the services or goods without any contractual or legal obligation to pass them on to another person.
Qualifying Income for Domestic or Foreign Permanent Establishments

Payable income to a Domestic or Foreign Permanent Establishment of a Qualifying Free Zone individual is considered taxable income and is subject to a 9% corporate tax rate for the Free Zone business.

Qualifying Income for Immovable Property located in a Free Zone

Income payable from transactions with Non-Free Zone Persons regarding Commercial Property or immovable property (not commercial) with any individual is considered taxable income and taxed accordingly.

De Minimis Requirements

De Minimis requirements are fulfilled when the non-qualifying revenue obtained by the Qualifying Free Zone Person in a tax period does not exceed the total Revenue Percentage or the amount specified by the Minister, whichever is lower. Certain revenues are not included in the calculation of non-qualifying revenue and total revenue.

Corporate Tax Services for Free Zones

Alliance Prime Accounting & Tax Consultancy is a leading tax consulting firm in Dubai with extensive knowledge of Corporate Tax Law. Our FTA approved Corporate Tax consultants offer comprehensive corporate tax solutions for Free Zones, including determining qualifying income and ensuring compliance with regulations to qualify as a QFZP for 0% corporate tax in the UAE.

Our Corporate Tax Services include:

  • Corporate Tax Impact Assessment
  • Corporate Tax Registration
  • Corporate Tax Return Filing
  • Corporate Tax Accounting
  • Corporate Tax Audit
  • Corporate Tax Compliance
  • Corporate Tax Advisory
  • Corporate Tax Transfer Pricing

Any queries related to Corporate Tax in Free Zones, reach out to Alliance Prime Accounting & Tax Consultancy for expert assistance.

Why is Alliance Prime the best Tax Consultancy in Dubai?

Alliance Prime is a leading provider of auditing, accounting, taxation, and advisory services in the UAE. Our expert team will guide you through the complex laws and regulations of UAE, including Corporate Tax, VAT, Excise Tax, Accounting and Bookkeeping, ESR, Financial Advisory, ERP, etc. We stay up-to-date with the latest changes in laws and regulations in the UAE. If you’re looking for reliable and professional auditing, accounting, taxation, and advisory services in the UAE, look no further than Alliance Prime. 

If you would like additional information or clarity on Corporate Tax or require assistance to Register for Corporate Tax, and its impact assessment,  visit alliance-acc.com or contact us at- +971 58 825 7795 or Email us at:- contact@alliance-acc.com

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