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UAE: How to check if a business is eligible for 0% corporate tax
Free-zone companies are not automatically exempted from corporate tax; certain conditions will apply, say experts
Harsh Doshi, Pavithra Balaji, and Basel Arafe during the 'Corporate Tax UAE Decoded' conference. — KT Photos: Shihab
Some misconceptions are going around about zero per cent tax eligibility, so companies are advised to look at their status and activities to know whether they can avail of the exemption, tax experts said during a conference on Wednesday.
A lot of businesses in the free zone "believe" that since they are based there, they would automatically be exempted from tax but this is not 100 per cent true, explained Mahar Afzal, chief executive officer at Kress Cooper, as he spoke at a conference titled Corporate Tax UAE Decoded, hosted by Khaleej Times.
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“They are in free zone, so they’re out of the corporate profit tax — this is one of the biggest misconceptions,” he said.
Mahar Afzal
“We need to look at the status of the businesses and activity they’re performing, then we will be able to decide if a zero per cent corporate tax will be applicable or not,” he said during the panel discussion on the topic of 'Navigating Corporate Taxation for UAE Free Zone Persons'.
The UAE’s Federal Tax Authority issues guidelines and also holds seminars and conferences regularly to support and provide guidance to businesses, especially the SME segment, so that they’re fully aware of local tax laws.
The 9 per cent UAE corporate tax regime has taken effect for financial years starting on or after June 1, 2023. It is one of the lowest corporate taxes in the world to make the country competitive and attractive for businesses.
Jai Prakash Agarwal, vice-chairman of ICAI Dubai, said that “if you are a free zone person and satisfied all the conditions, you have to register and file returns but may not have to pay taxes".
Jai Prakash Agarwal
Aatish Shah, head of tax for the GCC region at DP World, said that subject to compliance rules, the free zone offers zero per cent taxation.
“But on the flip side, entities that are not engaged in qualifying activities, just being in a free zone doesn’t necessarily mean they’re free from taxes. They need to analyse what activities they do and based on that they decide where they should take a leap – whether free zone or mainland,” he said.
Role of IT
In another panel discussion about the role of technology in modern tax compliance, Harsh Doshi, group tax manager at Dubai Investments, said that a lot of organisations are getting there in terms of technology solutions as tax technology is going to be a new rule within organisations.
He stressed the importance of having all the correct data as there is less time when it comes to communication with the authorities.
Kalaiarasan Manoharan, group tax director at Noon, said a company's technology strategy should be aligned with business strategy and advised firms to maintain a dashboard for the ease of tax compliance purposes.
Kalaiarasan Manoharan
Joao Cabral, group head of tax and treasury at Dutco Group, said the tax landscape is changing through technology.
“Now, we can see a massive adoption of technology by tax authorities and regulators across the globe.”
Joao Cabral
Basel Arafe, partner in UAE Corporate Tax for Deloitte, gave a presentation about navigating tax accounting in the first year of corporate tax. He advised businesses to put in place a tax accounting policy; analyse consolidated adjustments to evaluate year-end deferred tax impacts; and liaise with auditors to avoid last-minute surprises and have all working papers, including a tax memo ready among others.
Nirav Shah, director of Fame Advisory, gave closing remarks at the conference.
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