New Decisions by UAE Ministry of Finance Enhance Free Zones’ Role in Economic Growth
Dubai: The UAE Ministry of Finance has recently announced two significant decisions, namely Cabinet Decision No. 100 of 2023 and Ministerial Decision No. 265 of 2023, which bring about changes to the qualifying income and activities in free zones.
Recognizing the pivotal role played by free zones in the country’s economic growth and their ability to attract foreign direct investment, the UAE Ministry of Finance is committed to fostering a favorable business environment. Younis Haji Al Khoori, Undersecretary of the Ministry of Finance, highlighted the importance of these decisions in aligning with international taxation standards and further diversifying the UAE’s economy.
Al Khoori emphasized, “The certainty of a competitive Corporate Tax regime and offering a special regime for free zones cements the UAE’s position as a leading global hub for business and investment and drives its sustainable development agenda.”
Cabinet Decision No. 100 introduces an expansion in the definition of qualifying income. This expansion now includes income generated from the ownership or exploitation of qualifying intellectual property. The decision integrates the methodology outlined in the OECD’s modified nexus approach, as detailed in Ministerial Decision No. 265 of 2023.
In line with these decisions, Ministerial Decision No. 265 designates the trading of qualifying commodities as a qualifying activity. This allows a 0% corporate tax rate for income generated from the physical trading of various commodities on recognized stock exchanges. Additionally, the decision encompasses derivative trading income utilized for risk hedging purposes in these trading activities.
The significance of Ministerial Decision No. 265 is further amplified by its provision of clear guidelines on the scope of qualifying and excluded activities. This transparency provides invaluable clarity to businesses operating within free zones.
These decisions fortify the UAE’s status as a leading global business destination, attracting investors and facilitating sustainable economic development. By adapting to international taxation standards and continuously supporting the growth of free zones, the UAE Ministry of Finance ensures that these zones remain crucial catalysts for the country’s economic diversification strategies.
The future of the UAE’s economy looks promising, with these changes further enhancing the appeal of free zones to local and international businesses. Free zones will continue to play a significant role in driving the country’s sustained growth and attracting global investments.
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