Ministry of Finance(MoF) issued Cabinet Decision No. 55 along with Ministerial Decision No. 139 of 2023 on Determining Qualifying Income for the Qualifying Free Zone Persons. Qualifying Free Zone Person deriving following categories of income will be considered as having “Qualifying Income” for the purpose of enjoying the Corporate Tax Law:-
- Income derived from transactions with other Free Zones Persons , except for income derived from Excluded Activities.
- Income derived from transactions with Non Free Zone Person only in respect of Qualifying Activities that are not Excluded Activities.
- Non Qualifying Revenue derived by Qualifying free zones person in a relevant Tax Period if it fulfills the de minimis requirement which is lower of AED 5 Million or 5% of Total Revenue.
Qualifying Activities include:
- Manufacturing of goods or materials.
- Processing of goods or materials.
- Distribution of goods or material in or from a Designated Zones to a customer that resells such goods or materials, or parts thereof or processes or alters such goods or materials or parts thereof for the purposes of sale or resale.
- Ownership, management & operation of Ships.
- Reinsurance services, Wealth and investment management services, fund management services if subject to regulatory oversight.
- Headquarter services to Related Parties(RP) , Treasury and financing services to RP.
- Logistics services,
- Holding of shares and other securities.
- Financing and leasing of Aircraft , including engines and rotable components.
- Any activities ancillary to the activities listed above.
Excluded Activities include:
- Any Transaction with Natural Persons (subject to certain exceptions under Qualifying Activities related to shipping and aircrafts plus fund, wealth and investment management);
- Banking activities, Insurance activities, Finance and leasing activities, if subject to regulatory oversight.
- Ownership or exploitation of immovable property, other than Commercial Property located in freezone where the transaction in respect of such Commercial Property is conducted with other Free Zones Person.
- Ownership or exploitation of intellectual property assets
- Any activities ancillary to the activities listed above.
Please refer to our separate communication in this regard for further details.