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As the UAE continues to strengthen its position as a global business hub, recent changes to corporate tax laws have caught the attention of investors and corporations worldwide. These changes, which treat businesses in free zones and mainland entities differently, highlight the importance of expert corporate tax advisory in Dubai. Whether you operate in one of the UAE’s free zones or the mainland, professional guidance ensures compliance with the new regulations. It helps businesses make informed decisions about their operational structure.
The UAE offers distinct regulations for businesses operating in free zones compared to mainland entities. Dubai has over 40 free zones, each with its governing authority. Some of Dubai's most prominent free zones include the Dubai Multi Commodities Centre (DMCC), Jebel Ali Free Zone (JAFZA), and the Masdar City Free Zone in Abu Dhabi. These free zones have historically provided businesses with attractive benefits such as full foreign ownership and 100% profit repatriation.
For years, businesses in these zones enjoyed tax exemptions, including zero personal and corporate income taxes for up to 50 years. However, the UAE’s implementation of Federal Decree-Law No. 47 of 2022, which introduced a corporate tax, has altered the landscape. From June 1, 2023, a 9% corporate tax rate applies, though certain exemptions exist for businesses operating in free zones.
Mainland entities, meanwhile, are also subject to a 9% corporate tax on taxable income exceeding Dh 375,000. These businesses face stricter reporting standards but benefit from the ability to conduct business both domestically and internationally. In recent years, amendments to the Commercial Companies Law have granted mainland entities 100% foreign ownership in specific sectors, offering advantages similar to those in free zones.
Under the new corporate tax regime, free zone businesses may still qualify for exemptions if they meet specific criteria. Known as Qualified Free Zone Persons (QFZPs), these businesses can benefit from a 0% tax rate on qualifying income, while a 9% rate is applied to other taxable income. To achieve QFZP status, businesses must:
Maintain adequate substance within the UAE
Obtain qualifying income
Ensure they are not elected to be subject to corporate tax
Comply with transfer pricing rules and document requirements
Satisfy any additional conditions set by the Minister of Finance
Navigating these requirements can be complex, and failure to meet the criteria may result in significant penalties or missed tax benefits. For this reason, businesses in both free zones and the mainland should seek corporate tax advisory in Dubai to ensure full compliance with the latest regulations.
As Dubai’s tax landscape evolves, businesses need expert advice to remain compliant while minimizing tax liabilities. Corporate tax advisory in Dubai helps businesses understand the complexities of the new tax regulations, optimize their tax strategies, and avoid non-compliance risks. Tax advisors can assist in determining the best structure for a business, whether operating in a free zone or the mainland and guide them through the necessary steps to achieve QFZP status or secure other tax advantages.
Adapting to the new regulatory environment can be challenging, but businesses can effectively navigate the changes with professional tax advisory services. Expert advisors ensure that companies stay ahead of the curve, maintain operational efficiency, and capitalize on the UAE's opportunities.
The introduction of corporate tax in the UAE represents a significant shift for businesses operating in free zones and the mainland. For companies seeking to take full advantage of the tax incentives and avoid costly mistakes, working with corporate tax advisory in Dubai is essential. With the proper professional support, businesses can ensure compliance with the new laws and make strategic decisions that benefit their long-term growth in the UAE’s thriving economy.