File photograph. — Wam
The FZ companies will want sturdy accounting data for allocating bills and decide internet earnings from every of the above transaction streams.
By Pankaj Jain
Published: Sat 30 Apr 2022, 3:45 PM
Last up to date: Sat 30 Apr 2022, 3:48 PM
On Thursday, the UAE Ministry of Finance (MoF) launched a Public Consultation Document on UAE Corporate Tax. Here are some key questions answered by our professional.
Are free zone companies eligible for 0 per cent corporate tax?
Income earned from the next transactions is prone to profit from 0 per cent CT:
*Transactions with companies positioned exterior UAE.
*Trading with companies positioned in the identical or some other free zone.
*Certain regulated monetary companies directed at international market sale of products (from VAT Designated Zones) to clients in mainland if the shoppers are the importer-on-report.
Additionally, the next incomes also needs to be eligible for 0 per cent CT:
‘Passive earnings’ of the FZ firm which doesn’t have any department in mainland. ‘Passive earnings’ will embrace curiosity and royalties, dividends and capital positive factors from proudly owning shares in mainland UAE companies. Income from transactions with group companies positioned in mainland UAE. However, such funds/expense by mainland group companies to FZ firm won’t be allowed as a deductible expense.
All different earnings streams of a FZ firm is prone to be topic to CT.
The FZ companies will want sturdy accounting data for allocating bills and decide internet earnings from every of the above transaction streams.
Will free zone companies be required to fulfill any situations to be eligible for 0 per cent Corporate Tax?
The Free Zone companies can be required to keep up sufficient substance and adjust to all regulatory necessities.
Maintaining sufficient substance may require assembly the checks of Economic Substance Regulations (ESR) i.e. the presence of sufficient manpower, belongings and earnings-producing actions within the UAE. Further, the entity should be directed and managed within the UAE.
Will the companies equipped by Free Zone companies be topic to CT?
Income from transactions with companies positioned exterior UAE will profit from 0 per cent CT.
Income from companies equipped to the shoppers within the mainland UAE or in Free Zones is prone to be coated beneath 9 per cent CT.
I personal an organization in mainland UAE. Will the export of products and/or companies from mainland to abroad clients be topic to CT?
The coverage doc doesn’t present particulars in regards to the tax therapy of the export of products or companies from mainland UAE.
Considering the scheme of CT, earnings from the export of products/companies from mainland UAE is prone to be coated beneath 9 per cent CT.
Can I or my relations draw wage from the corporate that I personal? Alternatively, can I or my member of the family cost lease for the premises owned by me however leased to the corporate?
The coverage doc recognises that the absence of a private earnings taxation within the UAE can generate incentives for particular person house owners of taxable companies to erode CT base by making extreme funds to themselves or individuals related with them.
Accordingly, funds or advantages offered by a enterprise to its “Connected Persons” (outlined beneath) can be deductible as expense provided that the enterprise can show that the cost or profit:
corresponds with the market worth of the service offered; and is incurred wholly and completely for the needs of the taxpayer’s enterprise
The enterprise can be required to submit a disclosure containing info relating to their transactions with Related Parties and Connected Persons. All Related Party transactions and transactions with Connected Persons might want to adjust to switch pricing guidelines and the arm’s size precept. The salaries/lease can be tax free within the fingers of the recipients.
Who are “Connected Persons”?
An individual can be thought-about as ‘related’ to a enterprise if he/she is:
An particular person who straight or not directly has an possession curiosity in, or controls, the taxable individual.
A director or officer of the taxable individual.
An particular person associated to the proprietor, director or officer of the taxable individual to the fourth diploma of kinship or affiliation, together with by start, marriage, adoption or guardianship.
Where the taxable individual is a companion in an unincorporated partnership, some other companion in the identical partnership.
A “Related Party” as outlined within the legislation.
The author is the managing director of AskPankaj Tax Consultants. For suggestions and queries, you might write to [email protected]. Views expressed are his personal and don’t replicate the newspaper’s coverage.
https://www.khaleejtimes.com/business/are-uae-free-zone-companies-exempt-from-corporate-tax
