What it gives you
A free zone company that qualifies pays 0% corporate tax on its qualifying income and 9% on the rest. Qualification is tested every tax period.
The conditions
- Adequate substance in the free zone: people, premises and spending for its core activities
- Earning qualifying income from qualifying activities
- Staying within the de minimis limit for other income
- Pricing related-party transactions at arm’s length
- Preparing audited financial statements
- Not electing to be taxed at the standard rates
The de minimis limit
Non-qualifying revenue must not exceed 5% of total revenue or AED 5 million, whichever is lower. Go over it and the company loses the status.
What losing it costs
A company that fails the conditions is taxed at the standard rates for that period and the following four — five years in total. Check the position before year-end, not after.
