Corporate tax and the Free Zones – Ministry of Finance announces a public consultation.
27 July 2023
The UAE Ministry of Finance has announced a public consultation on free zone relief and has requested feedback on a number of key topics.
On 19 July, the Ministry of Finance announced a public consultation on corporate tax relief for free zone entities. This relief allows certain revenue streams generated by free zone companies to be taxed at the zero-rate.
Taxpayers are invited to provide feedback on the key issues, including the de minimis calculation and the definitions of Qualifying and Excluded Activities.
The consultation paper is a very informative and detailed document which provides proposals for the definition of each of the qualifying and excluded activities. It also includes some useful examples to illustrate how the proposals would apply in practice.
This consultation follows the release of recent Cabinet and Ministerial Decisions that set out a clear framework for free zone relief. However, while the Decisions provided only short legal descriptions of the qualifying and excluded activities, the consultation paper gives much more detailed proposals on how the activities would be interpreted in practice.
This is very helpful, but it must be stressed that the interpretations and information in the consultation paper are proposals only. The paper states it does not constitute the final legislative position, and taxpayers should not act on any proposals until final legislation or guidance is issued. This final guidance is expected to be released after the consultation process.
This consultation is a welcome development, and taxpayers affected by the proposals for the free zone relief should take the opportunity to give their feedback.
Responses to the consultation must be made by 2 August 2023. It can be accessed from the MOF website: Free Zone Public Consultation – Ministry of Finance – United Arab Emirates
For more information, please contact any of the corporate tax experts listed on our website.