Introduction

Umm Al Quwain Free Trade Zone (UAQFTZ) is a free zone in the United Arab Emirates that offers a number of benefits to businesses, including 100% foreign ownership, no income tax, and low import and export duties.

However, there are a few types of taxes that do apply to businesses in UAQFTZ ( Umm AL Quwain Freezone):

  • Value Added Tax (VAT): VAT is a consumption tax that is applied to the sale of goods and services in the UAE. The standard VAT rate in the UAE is 5%. However, businesses in UAQFTZ are exempt from VAT on their domestic sales.
  • Corporate Tax: Corporate tax is a tax on the profits of businesses. The standard corporate tax rate in the UAE is 9%. However, businesses in UAQFTZ are exempt from corporate tax on their qualifying income. Qualifying income includes income from activities that are carried out entirely within the free zone and income from exports.
  • Excise Tax: Excise tax is a tax on certain goods, such as tobacco, alcohol, and carbonated drinks. The excise tax rate varies depending on the good. Businesses in UAQFTZ are subject to excise tax on the sale of excisable goods to consumers in the UAE.

Here is a more detailed explanation of each type of tax:

Value Added Tax (VAT)

VAT is a consumption tax that is applied to the sale of goods and services in the UAE. The standard VAT rate in the UAE is 5%. However, businesses in UAQFTZ are exempt from VAT on their domestic sales.

To be eligible for VAT exemption, businesses in UAQFTZ must meet the following conditions:

  • The business must be registered in UAQFTZ.
  • The business must be engaged in activities that are permitted in UAQFTZ.
  • The business must have a physical presence in UAQFTZ.

Businesses in UAQFTZ are required to charge VAT on their exports. However, they can claim a refund of the VAT that they have paid on their inputs.

Corporate Tax

Corporate tax is a tax on the profits of businesses. The standard corporate tax rate in the UAE is 9%. However, businesses in UAQFTZ are exempt from corporate tax on their qualifying income. Qualifying income includes income from activities that are carried out entirely within the free zone and income from exports.

To be eligible for corporate tax exemption, businesses in UAQFTZ must meet the following conditions:

  • The business must be registered in UAQFTZ.
  • The business must be engaged in activities that are permitted in UAQFTZ.
  • The business must have a physical presence in UAQFTZ.

Businesses in UAQFTZ are required to pay corporate tax on their income from non-qualifying activities.

Excise Tax

Excise tax is a tax on certain goods, such as tobacco, alcohol, and carbonated drinks. The excise tax rate varies depending on the good. Businesses in UAQFTZ are subject to excise tax on the sale of excisable goods to consumers in the UAE.

To be liable for excise tax, businesses in UAQFTZ must meet the following conditions:

  • The business must be registered in UAQFTZ.
  • The business must be engaged in the sale of excisable goods.
  • The goods must be sold to consumers in the UAE.

Businesses in UAQFTZ can claim a refund of the excise tax that they have paid on their inputs.

Which are the tax benefits in Free Zone Sharjah?

Conclusion

Businesses in UAQFTZ are exempt from income tax and VAT on their qualifying income. However, they are subject to excise tax on the sale of excisable goods to consumers in the UAE.

It is important to note that the tax laws in the UAE are subject to change. It is therefore important to consult with a qualified tax advisor to ensure that you are compliant with all applicable tax laws.

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If you are serious about setting up a business in UAQFTZ, I highly recommend contacting BizDaddy. BizDaddy can help you make the process as smooth and stress-free as possible.