Companies licensed by a free zone authority in the UAE are referred to as Free Zone Persons. Such companies will be subject to the proposed UAE corporate tax but will continue to enjoy the current tax incentives if they maintain adequate substance and comply with all regulatory requirements including audit of books of accounts.
• Free Zone Persons can benefit from a 0% CT rate on income earned from transactions with businesses located outside of the UAE, or from trading with businesses located in the same or any other Free Zone
• The 0% CT rate will apply to income from certain regulated financial services directed at foreign markets
• A Free Zone Person that has a branch in mainland UAE will be taxed at the regular corporate tax rate on its mainland sourced income while continuing to benefit from the 0% corporate tax rate on its other income
• If a Free Zone Person transacts with mainland UAE but does not have a mainland branch, the Free Zone Person can continue to benefit from the 0% corporate tax rate if its income from mainland UAE is limited to ‘passive’ income
• The 0% corporate tax regime will also apply to transactions between Free Zone Persons and their group companies located in mainland UAE
• A Free Zone Person located in a Designated Zone for VAT purposes can benefit from the 0% corporate tax rate on income from the sale of goods to UAE mainland businesses that are the importer of record of those goods
