UAE Corporate Tax Regime: Impact on Free Zone Entities

The UAE Corporate Tax Law (CT Law) is effective for any financial year beginning on or after 1 June 2023 (i.e., for a company following calendar year, the first tax year would be 1 January 2024 to December 2024).

The CT Law is applicable to any juridical person incorporated in the UAE including Free Zone Entities (this includes companies, firms, LLPs, unincorporated JVs, etc.) and natural person carrying on business activities. Furthermore, any juridical person incorporated outside the UAE but effectively managed from the UAE would also be considered as a resident for UAE corporate tax purposes.

Non-residents would be taxed in the UAE in respect of their income derived from a Permanent Establishment (PE) in the UAE or in respect of income derived through a ‘Nexus’ in the UAE.

Corporate tax shall be imposed on a taxable person at the rate of 9%.

A Qualified Free Zone Person (QFZP) would be liable to a 0% corporate tax on its qualifying income and 9% tax on non-qualifying income.