Risk Assessment

A Qualifying Free Zone Person that fails to meet any of the conditions to be a Qualifying Free Zone Person will cease to be a Qualifying Free Zone Person from the beginning of the Tax Period for which it elects to be subject to the standard Corporate Tax rules and rates or in which it fails to meet the conditions to be a Qualifying Free Zone Person, and the four subsequent Tax Periods.

No Personal Income Tax: The UAE does not levy personal income tax, which significantly reduces the risk of double taxation for individual residents. The UAE has signed over 137 double tax treaties with various countries. These treaties help: Avoid taxing income in both the source country and the UAE. Mitigate taxes on dividends, royalties, capital gains, and other forms of income.

A natural person will be considered a UAE Tax Resident if the individual:
has their usual or primary place of residence and their centre of financial and personal interests in the UAE;
was physically present in the UAE for a period of 183 days or more during a consecutive 12-month period;
was physically present in the UAE for a period of 90 days or more in a consecutive 12-month period and the individual is a UAE national, holds a valid residence permit in the UAE or holds the nationality of any GCC Member State, where:
(i) he or she has a permanent place of residence in the UAE; or
(ii) he or she carries on employment or a business in the UAE.

The taxable income for a Tax Period is the accounting net profit (or loss) of the business, after making adjustments for certain items as defined in the Corporate Tax Law.

In principle, all legitimate business expenses incurred to derive taxable income will be deductible, although the timing of the deduction may vary for different types of expenses and the accounting method applied. For capital assets, expenditure would generally be recognised by way of depreciation or amortisation deductions over the economic life of the asset or benefit.

Expenditure that has a dual purpose, such as expenses incurred for both personal and business purposes, will need to be apportioned with the relevant portion of the expenditure treated as incurred wholly and exclusively for the purpose of the taxable person’s business.