Other BriefingsUAE Issues New Rules On Tax Payment Concerning Intellectual Property Income
The UAE has announced new rules on payment of tax in the country, clarifying the amount of tax payable on intellectual property, as well as a tax exemption on income earned trading selected items on registered stock exchanges.
The UAE Ministry of Finance has issued Cabinet Decision No. 100 of 2023 on Determining Qualifying Income, as well as Ministerial Decision No.265 of 2023 on Qualifying Activities and Excluded Activities.
Under the revised Cabinet Decision, the scope of Qualifying Income is extended to include the amount of Qualifying Income derived from the ownership or exploitation of Qualifying Intellectual Property calculated based on the methodology of the OECD’s modified nexus approach, which is prescribed in Ministerial Decision No.265 of 2023. The nexus approach requires a link between the income benefiting from the IP regime and the extent to which the taxpayer has undertaken the underlying R&D that generated the IP asset.
Ministerial Decision 265 of 2023 on Qualifying Activities and Excluded Activities also lists the trading of Qualifying Commodities as a Qualifying Activity, which allows for the free zone 0% corporate tax rate to apply to income earned from the physical trading of metals, minerals, energy, and agricultural commodities that are traded on a recognised stock exchange, as well as the associated derivative trading income used to hedge against, the risk of such trading activities.
Additionally, the Ministerial Decision clarifies the intended scope of Qualifying Activities and Excluded Activities thereby providing clarity and certainty to free zone businesses.
Younis Haji Al Khoori, Under-Secretary of the Ministry of Finance, said: “Free zones are central to the UAE’s economic growth, attracting foreign direct investment as well as fostering a favourable business environment.
“These new decisions reflect the continued significant role of free zones in the UAE’s economic diversification strategies and commitment to aligning with international taxation standards. 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.”
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Middle East Briefing is one of five regional publications under the Asia Briefing brand. It is supported by Dezan Shira & Associates, a pan-Asia, multi-disciplinary professional services firm that assists foreign investors throughout Asia, including through offices in Dubai (UAE), China, India, Vietnam, Singapore, Indonesia, Italy, Germany, and USA. We also have partner firms in Malaysia, Bangladesh, the Philippines, Thailand, and Australia.
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