Corporate tax introduction in the UAE has brought about a large debate among the business owners. Most entrepreneurs are of the opinion that after the corporate tax comes into play, there is no way of evading tax payment. However, this is not the case.
Although corporate tax has been introduced in the UAE, the theory of having 0 percent Corporate Tax in Dubai is still legally viable, even when your turnover is very large. Yes, even those businesses whose turnovers are of AED 100 crore, AED 500 crore and above can still enjoy this privilege as long as the structure and adherence are right.
The Common Misconception About 0% Corporate Tax in Dubai
Most entrepreneurs think that when they have a higher turnover than AED 3 million, they are required to pay 9% corporate tax. This is an assumption which has made even seasoned entrepreneurs pay tax unnecessarily.
Actually, even some of the long-standing consultants and businesses are not quite aware of the fact that even after these thresholds, 0% Corporate Tax in Dubai is still legally attainable.
The point is based on Free zone structures and qualifying activities.
The Legal Basis: Ministerial Decision No. 139 of 2023
The 0% Corporate Tax in Dubai is based on the Ministerial Decision No. 139 of 2023, which is going to be read together with Cabinet Decision No. 55 of 2023.
According to this decision:
“If a business qualifies as a Qualified Free Zone Person and conducts Qualifying Activities, then the income from such activities is eligible for 0% Corporate Tax in Dubai.”
This will be entirely legal, open-minded and supported by the UAE tax law.
What Is a Qualified Free Zone Person?
- Be enrolled in one of the UAE recognized free zones.
- Carry out qualifying activities as stipulated in the law.
- Have a proper economic substance and compliance.
- Make money through authorized operations.
This is because Company registration in Dubai Free Zones is an important strategic choice.
Qualifying Activities Eligible for 0% Corporate Tax in Dubai
The following are the main qualifying activities that enable business to enjoy 0 percentage Corporate Tax in Dubai:
- Creation of products or resources in the UAE.
- And completely qualified as an activity.
- Profits realized are subject to 0% corporate tax.
- Even when you are not starting your manufacturing afresh.
- Any processing or value addition will qualify.
- Holding dividend income earning companies.
- No business in operation needed.
- 0% Corporate Tax in Dubai remains open to it.
- Ship owners
- Ship management companies
- Shipping operations
- Investment funds
- Asset and portfolio managers.
- Wealth management companies.
- HQ/management services.
- Open to companies that are involved in qualifying activities.
- Intra-group financing
- Treasury operations
- Financial activities of leasing.
- Aircraft leasing companies
- Financing businesses that are associated with aviation.
- Distribution of Goods or materials to business customers.
- The goods have to be resold or processed again by the customers.
- There are no B2C transactions.
- General trading is eligible provided it is organized in the right way.
- Warehousing
- Freight forwarding
- Logistics and supply chain activities.
- Any service which is directly connected with the above qualifying activities.
- Examples: Services in the IT or software of shipping, logistics, or aviation companies.
- These are deemed as ancillary qualifying activities.
Why Do Mainland Companies Not Qualify?
- Mainland companies are not subject to Free Zone tax benefits.
- To pay no Corporate Tax in Dubai, the company should be a Free Zone one.
This renders Company registration in Dubai Free Zones necessary to maximize taxes.
Approved Free Zones for 0% Corporate Tax in Dubai
- RAKEZ (Ras Al Khaimah Economic Zone).
- IFZA
- Meydan Free Zone
- Ajman Free Zone
Final Thoughts: Structure Is Everything
- Even highly-selling companies are able to pay no corporate tax.
- Free Zones are very strong incentives.
- Strategic Company registration at Dubai turns into a permanent benefit.
FAQs
Q1. Is it still possible to pay 0% corporate tax in a company in Dubai?
Yes. Under the laws of the UAE, companies, which are registered in the qualifying Free Zones and conduct the approved activity, may continue to enjoy 0% Corporate Tax in Dubai.
Q2. Is there 0% corporate tax even where my turnover is very high?
Yes. It does not matter how large the turnover can be. The point is that you need to be a Qualified Free Zone Person and carry out qualifying activities by your company.
Q3. Does Dubai offer 0% Mainland Company Corporate Tax?
No. The mainland companies are tax at 9 percent of corporate tax rates. 0 percent Corporate Tax in Dubai is primarily offer via Free Zone frameworks.
Q4. What Business activities are taxed to 0% Corporate Tax in Dubai?
Different types of activities like manufacturing, shipping, logistics, B2B trading, fund management, holding companies and aircraft leasing can be eligible when performed using a Free Zone.
Q5. Does Free Zone company registration require 0% corporate tax?
Yes. To legally enjoy the zero percent Corporate Tax in Dubai, proper Company registration in Dubai in an approved Free Zone is necessary.
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