Understanding Qualifying Activities for Freezone Accounting

Key Qualifying Activities for Freezone Companies –

1. Manufacturing of Goods or Materials

   • Engaging in the production or assembly of goods within a Freezone can qualify for the 0% corporate tax rate. This includes all activities related to converting raw materials into finished products.

2. Processing of Goods or Materials

   • Activities involving the alteration or improvement of goods without changing their core attributes also fall under qualifying activities. This is particularly relevant for firms providing services to manufacturing clients.

3. Trading of Qualifying Commodities

   • Trading activities involving raw materials, metals, minerals, energy, and agricultural commodities can be considered qualifying activities. Freezone accounting firms can assist clients in ensuring their trading operations meet the necessary criteria.

4. Holding of Shares and Other Securities

   • Freezone businesses involved in investment activities, such as holding shares or securities for investment purposes, can benefit from the 0% tax rate. This is especially pertinent for accounting firms advising investment firms.

5. Ownership, Management, and Operation of Ships

   • Companies involved in maritime activities, including owning and managing ships, can qualify for the favorable tax rate. Accounting firms with clients in the maritime sector should ensure compliance with these guidelines.

6. Reinsurance Services

   • Providing reinsurance services within a Freezone is another qualifying activity. Freezone accounting firms can guide reinsurance firms on maintaining eligibility for tax benefits.

7. Fund Management Services

   • Freezone entities offering fund management services can qualify for the 0% corporate tax rate. This is crucial information for accounting firms managing investment funds and financial services.

8. Wealth and Investment Management Services

   • Firms providing wealth and investment management services within a Freezone can benefit from the 0% tax rate. This includes advising high-net-worth individuals and managing investment portfolios.

9. Headquarter Services to Related Parties

   • Offering headquarter services, such as strategic management and coordination for related parties, qualifies for the favorable tax treatment. Freezone accounting firms can optimize these services to ensure compliance.

10. Treasury and Financing Services to Related Parties

    • Providing treasury and financing services to related parties within a Freezone is a qualifying activity. Freezone accounting firms can assist clients in structuring their financing operations to maximize tax benefits.

11. Financing and Leasing of Aircraft

    • Businesses engaged in the financing and leasing of aircraft within a Freezone can benefit from the 0% corporate tax rate. This is a critical consideration for firms in the aviation sector.

12. Distribution of Goods or Materials in or from a Designated Zone

• • Activities related to the distribution of goods from a designated zone also qualify. This includes logistics and supply chain management services provided by Freezone entities.

Importance of Compliance and Record-Keeping

For Freezone accounting firms, ensuring that clients comply with the qualifying criteria is paramount. This includes maintaining adequate substance within the Freezone, adhering to transfer pricing rules, and preparing audited financial statements.

By focusing on these qualifying activities, Freezone accounting firms can help their clients leverage the benefits of the UAE’s corporate tax regime, ensuring optimized tax positions and compliance with regulatory requirements.

Conclusion

Understanding and leveraging qualifying activities can significantly benefit Freezone accounting firms. By staying informed and compliant, you can provide exceptional value to your clients, helping them navigate the complexities of the UAE’s corporate tax landscape.

At ProfiTrack Accounting, we specialize in providing comprehensive Freezone accounting services, ensuring our clients meet all qualifying criteria and maximize their tax benefits. For more detailed information and specific scenarios, you can refer to the Free Zone Persons Corporate Tax Guide at Federal Tax Authority United Arab Emirates .