UAE: How to check if a business is eligible for 0% corporate tax

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.

“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".

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.

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