Qualifying Vs Excluded Activities in UAE Corporate Tax Law 

In June 2023, the UAE introduced a new corporate tax law, impacting businesses’ tax and economic landscape significantly. Many UAE businesses are still grappling with understanding its implications. This clarification is crucial for businesses to navigate the new tax regime. 

To provide clarity, the Federal Tax Authority (FTA) has been issuing guides. Recently, the FTA clarified qualifying income, qualifying activities, and excluded activities, along with de minimis requirements. For further guidance, businesses can seek assistance from tax consultants in Dubai UAE like Kaizen. 

Let’s explore the disparity between excluded and qualifying activities.

Qualifying Activities Under UAE CT Law

Qualifying activities, outlined in Ministerial Decision No. 139 of 2023, include:

  • Manufacturing or processing goods/materials
  • Holding shares or securities
  • Ownership, management, and operation of ships
  • Regulated reinsurance and fund management services
  • Headquarters services to related parties
  • Treasury/financing services to related parties
  • Financing and leasing of aircraft
  • Distribution and logistics services
  • Ancillary activities supporting the listed activities

Excluded Activities Under UAE CT Law

Excluded activities, which don’t contribute to qualifying income, encompass:

  • Transactions with natural persons (excluding those related to qualifying activities)
  • Banking, insurance, finance, or leasing activities (with exceptions)
  • Ownership/exploitation of immovable property (excluding commercial property within free zones)
  • Ownership/exploitation of intellectual property assets
  • Ancillary activities tied to the above.

De Minimis Requirements

De minimis requirements are met when non-qualifying income earned by a qualifying free zone person doesn’t exceed:

5% of total revenue OR AED 5,000,000 in a tax period.

The FTA’s ministerial decision clarifies the distinction between qualifying and excluded activities. This clarification is crucial for businesses to navigate the new tax regime. 

For further guidance, businesses can seek assistance from tax consultants in Dubai UAE like Kaizen. They equipped with knowledge of the new CT regime, can help businesses understand and implement the regulations effectively. 

Kaizen as Your Corporate Tax Consultants Expert

Kaizen Business Consultants stands out as one of the premier auditing, accounting, and tax consulting firms in the UAE. Our team possesses in-depth knowledge of the new corporate tax (CT) regime, making us well-equipped to assist you in navigating its complexities. 

We can help evaluate how the new regime applies to your business in the UAE and establish the most effective compliance framework to prevent penalties. 

Reach out to Kaizen now to learn more about our services and how we can support your business.

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