Understanding 0% Corporate Tax Eligibility for UAE Businesses

Common misconceptions exist about eligibility for zero percent corporate tax among businesses operating in UAE free zones. During a recent conference titled "Corporate Tax UAE Decoded," hosted by Khaleej Times, experts highlighted the need for companies to thoroughly examine their status and activities to determine if they qualify for tax exemptions.

Mahar Afzal, CEO of Kress Cooper, emphasized that simply being based in a free zone does not automatically exempt a business from corporate tax. He explained,

“They are in a free zone, so they’re out of the corporate profit tax — this is one of the biggest misconceptions.”

Evaluating Business Status and Activities

Afzal stressed the importance of assessing businesses' specific status and activities to decide if they are eligible for the zero percent corporate tax. This careful evaluation is crucial for compliance and to avoid unexpected tax liabilities.

Jai Prakash Agarwal, vice-chairman of ICAI Dubai, noted that free zone businesses must register and file returns even if they meet all the conditions for tax exemption.

"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,"

he said.

Aatish Shah, head of tax for the GCC region at DP World, added that while free zones offer zero percent taxation subject to compliance rules, not all activities qualify. Companies must analyze their operations to determine the appropriate tax strategy, whether in a free zone or on the mainland.

Leveraging Technology for Tax Compliance

The role of technology in modern tax compliance was another key topic at the conference. Harsh Doshi, group tax manager at Dubai Investments, highlighted the growing importance of tax technology solutions for ensuring compliance. He stressed the need for accurate data and timely communication with authorities.

Kalaiarasan Manoharan, group tax director at Noon, advised companies to align their technology strategies with business goals and maintain dashboards for easier tax compliance. Joao Cabral, group head of tax and treasury at Dutco Group, pointed out the global shift towards technology adoption by tax authorities and regulators.

Preparing for the First Year of Corporate Tax

Basel Arafe, a partner in UAE Corporate Tax for Deloitte, gave a presentation on navigating tax accounting in the first year of corporate tax. He advised businesses to implement a tax accounting policy, analyze consolidated adjustments, and work closely with auditors to avoid last-minute surprises.

Nirav Shah, director of Fame Advisory, provided closing remarks, summarizing the key points discussed at the conference.

Understanding the nuances of corporate tax eligibility is crucial for UAE businesses, especially those in free zones. By evaluating their status and activities, leveraging technology, and adhering to best practices, companies can navigate the complexities of the tax landscape effectively.

News Source: Khaleej Times