UAE Corporate Tax Compliance in Hamriyah Free Zone

UAE Corporate Tax Compliance in Hamriyah Free Zone

Understanding Corporate Tax in the UAE

• The UAE introduced Corporate Tax under Federal Decree-Law No. 47 of 2022, effective from 1 June 2023.

Businesses are generally subject to:

• 0% tax on qualifying income (for eligible Free Zone entities)

• 9% tax on taxable income exceeding AED 375,000

• However, being located in a Free Zone like Hamriyah does not automatically guarantee a 0% tax rate.

Hamriyah Free Zone: Tax Position

• Hamriyah Free Zone (HFZ) is recognized as a Designated Free Zone under UAE tax regulations.

This means:

• Companies may benefit from 0% Corporate Tax on qualifying income

• 9% Corporate Tax applies to non-qualifying income

• All entities must still register and file Corporate Tax returns annually

What is a Qualifying Free Zone Person (QFZP)?

• To benefit from the 0% Corporate Tax rate, a company must qualify as a Qualifying Free Zone Person (QFZP).

Key Conditions Include:

• Maintaining adequate economic substance (staff, office, expenses in UAE)

• Earning qualifying income (from approved activities or other Free Zones)

• Complying with transfer pricing rules

• Preparing audited financial statements

• Ensuring non-qualifying income remains within limits

• If these conditions are not met, the company will be taxed at 9% on all income.

The De Minimis Rule (Critical for Compliance)

Regardless of tax status, all FOIZ companies must comply with UAE Corporate Tax regulations:

• Free Zone companies can still earn limited non-qualifying income under the De Minimis Rule: Must not exceed 5% of total revenue OR AED 5 million (whichever is lower)

Exceeding this threshold results in:

• Loss of QFZP status

• 9% tax on total income

• Disqualification for up to 4 years

Key Compliance Requirements for HFZ Companie

1. Corporate Tax Registration

• All businesses must register with the Federal Tax Authority (FTA), even if eligible for 0% tax.

2. Annual Tax Filing

• Companies must file Corporate Tax returns within 9 months from the end of the financial year. 

3. Maintain Proper Accounting Records

• Financial statements must be accurate and up-to-date

• Audits may be mandatory for Free Zone entities

4. Transfer Pricing Documentation

• Businesses dealing with related parties must maintain documentation aligned with OECD guidelines.

5. Economic Substance Compliance

• Companies must demonstrate real business operations within Hamriyah Free Zone.

Common Mistakes Businesses Make

Many companies assume Free Zone = tax-free. This leads to costly compliance errors such as:

• Failure to register for Corporate Tax

• Misclassification of qualifying vs non-qualifying income

• Ignoring transfer pricing requirements

• Poor documentation and recordkeeping

• Such mistakes can result in penalties, loss of tax benefits, and audits.

VAT and Other Tax Considerations

In addition to Corporate Tax:

• VAT (5%) applies if turnover exceeds AED 375,000

• Hamriyah Free Zone has special VAT treatment for goods but standard rules for services

• Businesses must comply with both VAT and Corporate Tax regulations simultaneously

Why Professional Tax Support is Essential

Corporate Tax compliance in Hamriyah Free Zone is not just about filing returns—it involves:

• Strategic tax planning

• QFZP eligibility assessment

• Risk mitigation

• Ongoing compliance monitoring

• Engaging experienced tax consultants ensures you retain Free Zone benefits while avoiding penalties.

How Gupta Accountants Can Help

• At Gupta Accountants, we specialize in Corporate Tax compliance for UAE Free Zone companies, including Hamriyah Free Zone.

Our services include:

• Corporate Tax Registration with FTA

• QFZP Eligibility Assessment

• Annual Tax Return Filing

• Transfer Pricing Documentation

• Audit Support & Compliance Advisory

Final Thoughts

• The UAE Corporate Tax regime has transformed the compliance landscape for Free Zone businesses.

• While Hamriyah Free Zone still offers significant tax advantages, these benefits now depend on strict adherence to regulatory requirements.

• Businesses that proactively manage compliance will not only avoid penalties but also maximize their tax efficiency in the UAE.

Need help with Corporate Tax compliance in Hamriyah Free Zone?

• Contact Gupta Accountants today and ensure your business stays compliant and tax-efficient.