Now in UAE, everyone will not get tax free system on opening a free zone company. Government will charge up to 9 percent abroad.

There are many misconceptions about the new corporate tax rules in the UAE, especially regarding companies located in free zones. Many people think that being in a free zone means they will not have to pay taxes, but this is not entirely true.

What do tax experts say?

According to tax expert Mahar Afzal, “Just being in a free zone does not mean that the company will be exempt from taxes. It depends on the type of business the company is doing.”

The status and activity of the company matters

Therefore, companies should check their status and activities to see if they are eligible for tax exemptions. The UAE’s Federal Tax Authority regularly provides guidelines and organises seminars on this, especially for small and medium-sized businesses.

9% corporate tax

The UAE’s corporate tax rate of 9% has come into effect for financial years beginning June 1, 2023. This is one of the lowest corporate taxes in the world, making the country attractive for businesses.

It is mandatory to file tax return even in free zone

According to Jai Prakash Aggarwal, vice-chairman of ICAI Dubai, even if a free zone company fulfils all the conditions and does not have to pay taxes, it will still have to file tax returns.

Free Zone and Mainland: What’s the Difference?

Atish Shah, tax head at DP World, explains that companies engaged in certain activities in the free zone may get tax exemption. But if the company is not involved in those activities, it may have to pay tax.

Summary for you

• Being in a free zone does not necessarily mean that the company will be exempt from taxes.
• Tax liability will be decided based on the status and activity of the company.
• The UAE has a corporate tax rate of 9%.
• Free zone companies are also required to file tax returns.