UAE announces New Corporate Tax Regulations related to free zones

Asma - | UAE

The UAE has recently announced new tax regulations aimed at promoting investment and economic growth in the country.

UAE Introduces New Tax Rules to Encourage Investment and Growth

These regulations cover various aspects, including the taxation of intellectual property and exemptions for certain income earned on registered stock exchanges. The UAE Ministry of Finance has issued two key decisions to implement these tax rules.

Qualifying Income from Intellectual Property

Under Cabinet Decision No. 100 of 2023, the scope of Qualifying Income has been expanded to include income derived from the ownership or exploitation of Qualifying Intellectual Property. This income will be calculated using the methodology of the Organization for Economic Co-operation and Development's (OECD) modified nexus approach, as outlined in Ministerial Decision No. 265 of 2023.

This decision is expected to encourage the development and protection of intellectual property in the UAE, attracting businesses and individuals with innovative ideas.

Tax Exemption for Trading Activities

In Ministerial Decision No. 265 of 2023, the government laid forth what counts as an eligible activity and what does not. In free zones, businesses can take advantage of a 0% corporate tax rate if they engage in Qualifying Activities, one of which is the trading of Qualifying Commodities.

This applies to income generated from the physical trading of various commodities, such as metals, minerals, energy, and agricultural products, which are traded on recognized stock exchanges. Additionally, income from associated derivative trading activities used to hedge against the risk of such trading is also eligible for this tax exemption.

This decision provides much-needed clarity and certainty to businesses operating in free zones, enabling them to engage in trading activities with a favorable tax regime. It supports the UAE's economic diversification strategies and aligns with international taxation standards.

Promoting Economic Growth

Free zones are crucial to the UAE's economic expansion, according to Younis Haji Al Khoori, Under-Secretary of the Ministry of Finance. The new tax decisions, he claimed, show how important free zones are for drawing in foreign direct investment and fostering an atmosphere that is conducive to business.

The UAE's commitment to providing a competitive corporate tax regime and special tax regimes for free zones positions the country as a leading global hub for business and investment. These measures aim to drive sustainable development and encourage businesses to invest and grow within the UAE.

Overall, these new tax rules are part of the UAE's ongoing efforts to enhance its economic landscape, promote investment, and align with international taxation standards, thereby fostering a thriving business environment.

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