The introduction of corporate tax in the UAE has led to significant changes in the business world. The government has created patents and software to impose a zero percent corporate tax to encourage innovation and economic growth. In this blog, we look at what qualifies as intellectual property or a patent according to the Freezone Directives May 2024.
A Brief Overview
The Free Zone Law provides benefits to qualified persons (QFZPs) who conduct research and development (R&D) activities to create qualified intellectual property. If there is a direct relationship between revenue and related R&D expenses, qualified revenue is derived from Complementary Intellectual Property. The Nexus method states that Qualifying Revenue arises when the QFZP expands R&D funds directly or through transfers to an unrelated party. Eligible expenses are based solely on the estimated costs associated with development activities. If QFZP acquires qualifying intellectual property or provides R&D to a related party outside the UAE, income from these activities is not eligible. To benefit from the law, the QFZP must establish a system to track the income and revenue of qualified intellectual property to demonstrate the relationship between qualified and qualified. (see section 9.6.1). If QFZP data is insufficient to trace back to specific assets, goods, or families of assets, special rules apply to money spent before the first tax period. (see section 9.6.2)
Patents and Intellectual Property
Patents are an important element of innovation and intellectual property protection. In the UAE, patents are recognized as assets that protect plants, animals, and orphan drugs. They are presented by qualified leaders from around the world. Moreover, a useful system for the protection of technical solutions on which natural law is based has recently been implemented by the UAE government, providing quasi-patent protection for non-traditional innovations.
Software and Copyrighted Software
Programs have lately been blanketed within the UAE company tax regime following a ministerial selection from 2020 that categorized their traits much like patent assets. That means software programs developed within the UAE can qualify for a 0% company tax charge and end up being highbrow property. To similarly make matters clear, the Federal Tax Authority will in all likelihood launch a report outlining which charges qualify and the way they may be claimed back.
Qualifying Costs and the UAE Patent Box
The UAE patent field is a progressive framework used globally by governments to inspire the advent and domicile of highbrow business property. The FTA has followed this OECD framework, which shows that studies and improvement charges incurred inside UAE unfastened zones (except non-unfastened region sports or those unconnected with unfastened zones), in addition to extra charges exceeding 30 percent from different charges, ought to all qualify beneath its umbrella as qualifying charges, in general, with any greater than 30 percent brought on for different charges to shape a complete sum and determine the general price.
Free Zones and the Corporate Tax Regime
Free zones play an important function within the UAE economy, presenting corporations with numerous blessings like comfortable overseas possession restrictions, simplified administrative methods, and current infrastructure. Furthermore, their corporate tax regime enacts a 0% company tax price on sure sports and transactions inside sure qualifying free zones; to qualify under this scheme, a free zone person needs to preserve good enough substance in a free zone, generate qualifying income, no longer make an election to concern themselves with the everyday UAE company tax regime, observe arm`s duration precept switch pricing policies, and produce and preserve audited economic statements annually.
Conclusion
Free zones play an important function within the UAE economy, presenting corporations with numerous blessings like comfortable overseas possession restrictions, simplified administrative methods, and current infrastructure. Furthermore, their corporate tax regime enacts a 0% company tax price on sure sports and transactions inside sure qualifying free zones; to qualify under this scheme, a free zone person needs to preserve good enough substance in a free zone, generate qualifying income, no longer make an election to concern themselves with the everyday UAE company tax regime, observe arm`s duration precept switch pricing policies, and produce and preserve audited economic statements annually.
How ebs chartered accountants as corporate tax consultants help?
Free zones play an important function within the UAE economy, presenting corporations with numerous benefits like comfortable overseas possession restrictions, simplified administrative methods, and current infrastructure. Furthermore, their corporate tax regime enacts a 0% company tax price on sure sports and transactions inside sure qualifying free zones; to qualify under this scheme, a free zone person needs to preserve good enough substance in a free zone, generate qualifying income, no longer make an election to concern themselves with the everyday UAE company tax regime, observe arm`s duration precept switch pricing policies, and produce and preserve audited economic statements annually. ebs Chartered Accountants can play an essential role in supporting UAE businesses with their corporate tax obligations.
