Recent amendments in income tax regulations have provided substantial relief to commodity traders operating from free zones in the dynamic landscape of the UAE exchange. The paradigm shift in taxing income from trading ‘qualifying commodities’ with non-free zone entities marks a significant change in approach. Therefore offering new opportunities for businesses in the ever-evolving UAE markets.
Tax Incentives for Commodity Traders in Free Zones
One of the key highlights is the provision of a 0 per cent tax rate for income derived from trading qualifying commodities in free zones, not designated as ‘designated zones.’ This encompasses metals, minerals, energy, and agriculture commodities traded on recognised commodities exchange markets in the UAE or overseas. Expanding the tax benefits to include physical trading activities and associated derivative trading provides a substantial boon for commodity traders. Furthermore, the move aims to foster growth in the sector and attract more businesses to the free zones across various UAE cities.
UAE Income Tax: Intellectual Property and Adequate Substance Requirements
In a significant shift, income from ‘Qualifying Intellectual Property’ ownership is now eligible for a 0% tax rate. Therefore marking a departure from the previous exclusion. However, businesses must adhere to the ‘adequate substance’ requirement to claim this favourable tax rate. Adequate substance involves conducting core income-generating activities (CIGA), maintaining the right number of employees, and incurring operating expenditures. Ensure compliance with the location condition by keeping the substance within the designated or free zone, even when outsourcing.
In conclusion, the recent amendments to the UAE income tax regulations present a promising landscape for businesses engaged in commodity trading and intellectual property ownership. The dedication to fostering a business-friendly atmosphere is evident in extending tax benefits to free zones, including intellectual property income. The unfolding UAE chapter promises a surge in growth, job creation, and economic development, presenting exciting opportunities across UAE cities. Businesses must embrace changes and ensure compliance with the requirement to capitalise on new tax incentives in the UAE exchange.