In the UAE, rules and legal compliance factors for the Corporate Tax law look different for different entities. Each entity or person falling under the Corporate Tax Law is different- both in function and adherence. The 0% Corporate Tax section applies to the Free Zone persons that derive their income from transactions with other Free Zone or Non-Free Zone persons- provided the income isn’t derived from the ‘excluded activities’ list provided by the UAE Governing Authority. Any person that is paying 0% corporate tax has qualifying income is called a qualifying income person (QIP). These individuals have to meet a few requirements to become eligible to skip over the UAE Corporate tax requirement. This article will about the role of corporate tax consultant in Dubai who provide assistance in providing a list of qualified activities under the Qualified Income Person (QIP) for 0% corporate tax in Dubai, UAE.
Qualifying Income In The Emirates’ Free Zones
The UAE has about 44 Free Zones which consist of both individuals and entities that conduct business within the Free Zones only or also outside the country. This holds great potential for people looking to earn a solid income via transactions and business without having to lose a huge chunk of it to taxes – unlike in most countries.
For Free Zone Qualifying Income Persons (QIPs)
- Qualifying income specifically refers to income generated from activities deemed “qualifying for 0% Tax” by the government. These activities include manufacturing, trading, holding securities, headquartering, and others listed in government documents (more on qualifying activities below). QIPs enjoy a 0% corporate tax rate on their qualifying income.
- However, income from ‘excluded activities’ like banking, insurance, and finance and leasing do not fall under Qualifying Income.
- Additionally, QIPs must comply with “de minimis” requirements. This means the income derived from non-qualifying activities cannot exceed a certain percentage of their total income.
- Qualifying income includes income acquired from transactions with other Free Zone persons- provided it isn’t derived from an excluded activity.
- It also includes income acquired from transactions with Non-Free Zone persons (domestic or foreign), only in case of ‘Qualifying Activities’.
Qualifying income also includes any other special case where the De Minimis criteria is met.
The De Minimis Requirement
The de minimis rule lets Free Zone companies earn a small amount of non-tax-free income without losing their tax benefits.
You can have a little bit of non-tax-free income as long as it stays within two limits:
- Limit 1: It can’t be more than AED 5 million.
- Limit 2: It can’t be more than 5% of your total income.
If you stay within these limits, any income that doesn’t fit the other tax-free categories will still be considered tax-free.
Qualifying Activities Under the Umbrella of Qualifying Income
Apart from the De Minimis requirement, there are “activities” described in the official Government documents that further make you eligible for the 0% corporate tax scheme. Basically, these include transactions with Non Free Zone Persons but only if they fall under a certain criteria, like:
- Making or processing stuff: From building cars to toys for kids, creating something qualifies.
- Owning or managing assets: Ships, stocks, and even planes can be your tax-free playground.
- Providing specialized services: Reinsurance, fund management, and HQ support for your own companies are all welcome.
- Moving things around: Logistics and distribution
Providing Services
- Spread the risk, share the burden: Reinsurance services are a surefire way to secure your financial future.
- Help others grow their wealth: Fund management and wealth management services are your golden ticket to tax-free financial success.
- Manage your global operations from the UAE: Headquarter services for your related parties, done and dusted, without any tax headaches.
- Lend a hand (and collect interest) without the taxman: Treasury and financing services for related parties – a win-win situation for everyone.
- Take to the skies with tax-free deals: Financing and leasing aircraft, engines, and components – soar high without any tax turbulence.
- Apart from that, ancillary activities- any small activity that supports any of those above, will also automatically fall into the tax-free parameter.
Now that you know the different parameters included in the 0% Corporate Tax ruling, you may be feeling brave enough to go dip your hands into some of the activities above.
While the UAE can be a very promising place to check out your business hands- it can also be tricky to navigate if you aren’t aware of adherence factors. Which is why it is crucial to keep up with the latest economic legalities- both UAE and any other country you may be dealing with.
If you have that under control- you’re ready to play safely on the tax playgrounds.
ebs chartered accountants as Your Best Corporate Tax Advisor In Dubai
Ensure accurate payment of corporate taxes to the authorities and stay complied to all the new compliance requirements of the new CT law with the help of expert assistance provided by the veterans of ebs chartered accountants.
The team of ebs chartered accountants not only provides you with the best tax services but also enables you to identify the possible opportunities to cut down the tax costs and stay ahead of the competitors. To know more about our Tax services contact us now
FAQs
What are some examples of qualified activities under the Qualified Income Person (QIP) program for 0% corporate tax?
Some examples of qualified activities include manufacturing, information technology services, research and development, and export-oriented activities.
How does a company qualify as a Qualified Income Person (QIP) for the 0% corporate tax rate?
To qualify as a QIP, a company must engage in eligible activities as defined by the government, meet specific criteria related to income and employment generation, and comply with all relevant regulations and reporting requirements.
Are there any restrictions on the types of companies that can participate in the Qualified Income Person (QIP) program?
Generally, companies that are engaged in illegal or harmful activities, such as gambling or tobacco production, are not eligible to participate in the QIP program.
How can a company apply for the Qualified Income Person (QIP) program and benefit from the 0% corporate tax rate?
Companies can apply for the QIP program through the relevant government agency or department responsible for economic development. Once approved, they can enjoy the 0% corporate tax rate on their qualified income generated from eligible activities.