Stock - Corporate Tax
The new decisions clarify the activities in scope for both Qualifying Activities and Excluded Activities. Image Credit: Emily Habib

Dubai: The UAE Ministry of Finance has released two significant decisions, Cabinet Decision No. 100 of 2023 and Ministerial Decision No. 265 of 2023. Under these decisions, changes have been made to qualifying income and activities in free zones.

“Free zones are central to the UAE's economic growth, attracting foreign direct investment as well as fostering a favorable business environment,” Younis Haji Al Khoori, Undersecretary of the Ministry of Finance. “These new decisions reflect the continued significant role of free zones in the UAE’s economic diversification strategies and commitment to aligning with international taxation standards.”

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“The certainty of a competitive Corporate Tax regime and offering a special regime for free zones cements the UAE’s position as a leading global hub for business and investment and drives its sustainable development agenda,” he added.

Cabinet Decision No. 100 expands the definition of Qualifying Income to include income from the ownership or exploitation of Qualifying Intellectual Property, following the methodology of the OECD's modified nexus approach outlined in Ministerial Decision No. 265 of 2023.

Ministerial Decision No. 265 lists the trading of Qualifying Commodities as a Qualifying Activity, allowing a 0 per cent corporate tax rate for income generated from physical trading of various commodities on recognized stock exchanges. It also covers derivative trading income used for risk hedging in such trading activities.

Furthermore, the Ministerial Decision provides clarity on the scope of Qualifying and Excluded Activities, offering transparency to free zone businesses.