December 11, 2022Dated: | Byadmin admin | The UAE corporate tax may be applicable to free zone businesses and branches registered in any of the UAE’s free zones. Free zone companies must make sure they are fully prepared for the new tax system because they are not exempt from the UAE corporation tax. Free zone companies may find it difficult to get ready for the corporate tax system because it has not yet been published. With the assistance of tax consultants in Dubai, they may begin planning though. Free zone companies should not worry about preparing their UAE business taxes because the government’s Public Consultation Document has the necessary information. The blog below will further inform and enlighten the free zone persons on how to get ready for the UAE corporate tax: For Free Zones companies those who are delayed in preparing their UAE corporation tax can use the following fast way to determine whether or not income tax is applicable to them: A Free Zone Person with a branch in the mainland UAE will continue to enjoy the benefits of the 0% CT rate on its other revenue while being subject to the ordinary CT rate on income derived from the mainland. Transactions between Free Zone Persons and their group firms based on the UAE’s mainland will be subject to the 0% CT regime. However, payments paid by a mainland group firm to the Free Zone Person will not be deductible as an expense. A Free Zone Person may take advantage of a 0% CT rate on revenue received through dealings with companies outside of the United Arab Emirates, from trading with companies in the same Free Zone, or from trading with companies in any other Free Zone. If a Free Zone Person transacts business with the UAE mainland but does not have a branch there, the Free Zone company can still take advantage of the 0% CT rate as long as its income from the mainland UAE is restricted to “passive” sources like interest, royalties, dividends, and capital gains from owning shares in mainland UAE companies. If a company is located in a Designated Free Zone, for Value Added Tax (VAT) reasons, if the company clears the goods from customs from a Mainland Company, can take advantage of the 0% CT rate on profits from the sale of products to UAE mainland companies. A Free Zone Person will not be eligible for the 0% CT regime for any of their income if they get any other income from the mainland. How a Free Zone Company can prepare for the Upcoming UAE CT? Restructure your Business. With the right company structure, a company in a free zone can continue to enjoy a 0% corporation tax rate. Corporate tax advisers in Dubai advice beginning the restructuring right away, however, it may take some time depending on how complicated your company is. If you set off the planning, the first financial year will start on or after June 1st, 2023. The corporate legal framework of a free zone person or group that maintains a mainland firm, as well as the legal agreements that enable business dealings between such companies, will also be necessary. If a Free Zone Person currently gets or anticipates receiving any money from the mainland, it is required to promptly conduct an assessment to establish if its corporate structure is adequate. Get the Financial Statements Audited. To make sure UAE corporate tax compliance, you should put audited financial statements at the top of your priority list. The UAE corporate tax public consultation paper makes it clear that in order to take advantage of the 0% tax rate, free zone entities must have audited financial accounts. The audited financial statements must be prepared in accordance with the international accounting standards that the UAE has recognized, like IFRS. Alternative standards can be used by some free zone entities, such as SMEs, to decrease the financial burden of compliance. Audited financial statements will support the free zone enterprises in making operational and risk-based choices on internal tax issues. They will be able to get ready for any upcoming tax audits because of that as well. Why Flying Colour? Flying Colour Tax Consultant LLC, provides audit assistance in resolving tax issues, as auditors can make concrete suggestions for improving the company based on the findings of their records. Additionally, we partner with over 18 agents who are authorized to conduct audits in various jurisdictions, depending on the needs of our clients. Our experts analyze, identify and resolve your business and tax issues. We promise quality and timely support all year round. In the event that the Federal Tax Authority (FTA) of the UAE serves any notifications, we provide high-quality, hassle-free services including CT Assessment & Advisory Services, CT Compliance Services, and CT Agent Services representing to the FTA.