Taxation of businesses in the UAE's free economic zones

The United Arab Emirates is known for its attractive investment climate. The country offers companies the opportunity to register in free zones with simplified procedures and preferential tax treatment. Let's take a look at the key aspects of the tax system for companies registered in free zones, dispelling common misconceptions about the complete absence of taxes.

1. There are no taxes in FEZ

Previously, there was no income tax in free zones, but two years ago it was introduced at a rate of 9%. This change has radically reshaped the tax landscape. The mechanism for applying this tax has its own nuances for different organizations.

2. Registration in a free zone guarantees complete exemption from VAT

A 5% value-added tax does not apply to activities outside the UAE. When transactions occur within the country, the tax must be paid.

It is worth highlighting the concept of Designated Zones – specially designated areas within FEZs. Companies operating here are exempt from VAT, subject to strict compliance with the established conditions. These are often related to the nature of the business, the export of goods/services, and the location of both the seller and the buyer.

3. All companies pay corporate tax in full

The status of Qualifying Free Zone Person (QFZP) plays a key role. This is a special status granted to companies that meet the criteria set out in the legislation. These criteria may include:

Type of activity
Location
Company structure
Ensuring a minimum economic presence

Companies that have obtained QFZP status are eligible for preferential tax treatment, including possible tax credits or deferrals. However, obtaining this status requires a thorough analysis of compliance with all established requirements and consultation with tax specialists.

Thus, the peculiarities of taxation in the UAE free zones require careful study. Professional advice from specialists often ensures tax optimization and effective business operations.