The introduction of Corporate Tax in the UAE has shifted the financial landscape. While the 9% standard rate generally applies, Free Zone entities operate under special rules.
Qualifying vs. Non-Qualifying Income
The key lies in classifying your income. Qualifying Free Zone Persons benefit from a 0% rate on Qualifying Income.
- Qualifying Income: Typically transactions with other Free Zone persons, or specific qualifying activities.
- Non-Qualifying Income: Subject to the standard 9% rate if de minimis requirements are not met.
The De Minimis Requirement
If non-qualifying income exceeds 5% of total revenue or AED 5 million (whichever is lower), the entity loses its 0% status for that entire year.
Next Steps
Strict bookkeeping is mandatory to segregate these income streams. Errors can result in the 9% rate being applied to your entire revenue. Contact V Lead today to ensure your Free Zone operations are classified accurately.
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