UAE issues tax exemptions for freezones as corporate tax goes into effect: The UAE has exempted business operating inside freezones from its new 9% corporate tax, which went into effect on Thursday, according to a Finance Ministry notice and a federal decree (pdf). The exemptions will benefit businesses in more than 30 freezones throughout the UAE.

What corporate tax? The new regulation applies to taxable income in excess of AED 375k and follows on from a 5% value added tax (VAT) that was rolled out in 2018. The move further erodes the UAE’s status as a tax haven, which had helped it rise to prominence as a top destination for international trade and the mega rich.

The exemptions also extend to income earned from trade with the UAE mainland in strategic sectors including manufacturing, goods processing, and logistics. “The regime has been designed to ensure strategic sectors will thrive in the freezones. Some level of migration may happen but the overall objective is ensuring the UAE remains attractive,” Reuters quoted the Finance Ministry’s executive director for tax policy Shabana Begum as saying.

The UAE’s government cites international efforts to combat tax evasion, as well asnew challenges arising from digitalisation in the global economy, as the reason behind the move, Reuters said.

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