New Corporate Tax Guidance for UAE Free Zone Distributors

Businesses operating in the distribution of goods within or from designated free zones in the UAE are set to receive clarification regarding their position under the corporate tax regime.

The Federal Tax Authority (FTA) is preparing to release updated guidance to ensure that distribution businesses can confidently benefit from the 0% corporate tax rate available to qualifying income generated in free zones.

Until now, many companies involved in distribution were awaiting specifics on how the corporate tax law would apply to them. The newly issued Ministerial Decision by the UAE Ministry of Finance aims to resolve this uncertainty.

The update outlines specific procedures that qualifying free zone businesses must follow, particularly regarding the preparation and maintenance of audited financial statements in compliance with corporate tax regulations.

In addition, the guidance includes new requirements for tax groups. All tax groups will now be obliged to prepare audited, special-purpose aggregated financial statements. However, to ease the administrative burden, the Ministry has confirmed that individual members within a tax group will not need to prepare separate audited stand-alone accounts.

Further guidance from the FTA is expected soon, offering more detail on the framework for compiling these special-purpose financial statements for corporate tax purposes.

This move reinforces the UAE’s continued commitment to maintaining a transparent, pro-business environment while ensuring compliance with the evolving corporate tax structure.

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