UAE Ministry of Finance Revamps Corporate Tax Regulations for Free Zones

Dubai: The UAE Ministry of Finance has introduced significant changes with the issuance of Cabinet Decision No. 100 of 2023 and Ministerial Decision No. 265 of 2023. These decisions specifically impact qualifying income and activities within free zones.

Younis Haji Al Khoori, Undersecretary of the Ministry of Finance, emphasized the vital role of free zones in the UAE’s economic growth and their significance in attracting foreign direct investment. The decisions underscore the UAE’s commitment to aligning with international taxation standards and enhancing the competitiveness of its Corporate Tax regime.

Cabinet Decision No. 100 broadens the definition of Qualifying Income to encompass income derived from the ownership or exploitation of Qualifying Intellectual Property. This aligns with the OECD’s modified nexus approach, detailed in Ministerial Decision No. 265 of 2023.

Ministerial Decision No. 265 designates the trading of Qualifying Commodities as a Qualifying Activity, qualifying for a 0% corporate tax rate for income generated from the physical trading of various commodities on recognized stock exchanges. It also includes derivative trading income utilized for risk hedging in such trading activities.

Moreover, the Ministerial Decision provides clarity on the scope of Qualifying and Excluded Activities, offering transparency to businesses operating within free zones. The decisions aim to maintain a competitive Corporate Tax regime, reinforcing the UAE’s position as a global hub for business and investment, and align with its sustainable development agenda.