Dubai has been one of the world’s premier business centers for entrepreneurs as well as any business house that wants to be a part of tax-free advantages. However, with increasing global tax policies along with new regulations, you might wonder whether Dubai still offers its coveted tax-free business zones and how you can make the best use of them in 2024.
What are Dubai’s tax-free business zones?
The appeal of Zero tax in Dubai stems from free zones. Free zones are the special areas designed to attract foreign investors to offer financial incentives like full foreign ownership, repatriation of profits, and most importantly, no corporate tax in Dubai.
Even with the global tax changes recently made, these free zones operate under beneficial tax policies such as those undertaken by the Dubai Multi Commodities Centre, Dubai Silicon Oasis, and Jebel Ali Free Zone. Companies set up in these free zones can enjoy the zero tax Dubai policy if one meets some preconditions.
However, the introduction of corporate tax UAE in 2023 has given a slight twist to the scenario. While businesses running on mainland Dubai must pay a 9% corporate tax, free zone companies can claim the tax exemptions if their activities fall under the regulations of free zones.
Is There Corporate Tax in Dubai Free Zones?
Most entrepreneurs would want to know whether free zones are exempted from corporate tax under Dubai. Indeed, the answer to this depends on the nature of your business and could be answered by tax advisors in Dubai.
Generally speaking, if your free zone company operates exclusively within the free zone and doesn’t trade directly with the mainland of the UAE, it’s still exempt from corporate taxes. Also, it shall comply with the UAE’s ESR.
However we need to analyze separately for trading companies and companies providing services. For instance, if you are trading company and if either sells to another free zone company or export to countries outside the UAE, then you can qualify for no corporate tax regime in a free zone. The same relief is available if they import and sells to even mainland Companies. However import/export benefit is available only if the Company is registered in a designated free zone. For a service company, zero tax benefit will be available only if it provides services to free companies exclusively- even if it provides services to foreign person, then corporate tax will apply. In short, if you have substantial business operations on the mainland, corporate tax will apply.
How to Avoid Corporate Tax in Dubai?
Planning is perfect when one aims for zero tax liability. Here are steps in which corporate tax can be lawfully avoided in Dubai:
- Set up your business in a right free zone: Choose a reputable zone aligned with your industry, such as JAFZA, DAFZA etc for trading or DIFC for finance.
- Keep your operations free-zone focused: Ensure transactions remain within free zones or are international. Avoid dealing with mainland UAE businesses.
- Comply with ESR and Transfer Pricing rules: These regulations ensure your business operations justify your tax position.
Professional guidance from approved tax agents in Abudhabi or reputed tax consultants in Dubai like JAXA can help untangle Dubai’s complicated tax scene and ensure all possible benefits of zero tax Dubai.
What Changes Should Businesses Expect in 2024?
As the UAE changes to meet global tax standards, businesses should monitor changes in regulations. Some of the key ones entering the landscape for 2024 are as follows:
- Tighter compliance measures: Free zone entities will have to prove genuine economic activity to gain tax exemption.
- Tax changes: The free zones still attract, but slight policy modifications will be seen to harmonize international agreements.
- Digital tax: Businesses trading through the web might be subjected to new regulations, considering the government’s introduction of tax regulations prevailing across the world.
Despite the reforms, free zones continue to be an easy haven for businesses seeking relief from tax liabilities.
Why Free Zone in 2024?
The establishment of your firm in a Dubai-free zone still provides unmatched benefits. Some advantages are as follows:
- 100% foreign ownership, no local sponsor required.
- Import/export duties-free.
- Simplified company setup procedure.
- World-class infrastructure and global markets.
With proper corporate tax planning in Dubai, corporate tax could be avoided in Dubai-free zones; this makes it an ideal destination for startups and established businesses.
Dubai continues to make its name known as a tax haven for entrepreneurs. Within free zones, you are still able to enjoy zero tax Dubai benefits , though it is essential to be in compliance with the changed regulations in order to maintain these advantages. It is important to consult with professional tax consultants in Dubai to understand how companies can leverage the tax benefits.
JAXA Chartered Accountants, being an FTA approved tax agent in UAE, can help you navigate the tax system of Dubai with ease. Whether you start fresh or optimize operations, we keep you ahead of the game. Your financial future is in trusted hands at JAXA!
