Understanding Qualifying and Excluded Activities in UAE CT Law
Main Differences in Qualifying and Excluded Activities
The UAE started corporate tax law in June 2023. This new rule made many companies and people look at their business closely. Mubarak Al Ketbi (MAK) Auditing always helps companies in the UAE understand what’s new and what to do next. Many businesses still try to learn what the new tax law means for them.
The UAE government and the FTA keep making guides and updates to help everyone. You must know the main differences between qualifying activities and excluded activities. If you know these points, you can avoid mistakes and follow the law.
What Are Qualifying Activities in UAE Corporate Tax Law?
A qualifying activity is a job or business type that the UAE government approves for special tax rules. If you do these jobs, you may pay less tax or get special benefits. The law gives a clear list of these activities.
Here are main examples of qualifying activities:
- Making goods or materials
- Processing goods or materials
- Holding shares or other securities
- Owning, managing, or running ships
- Giving reinsurance services (approved by the authority)
- Managing funds (approved by the authority)
- Offering wealth and investment management (approved by the authority)
- Providing headquarters services for related parties
- Treasury or financing for related parties
- Leasing or financing aircraft and engines
- Distributing goods or materials from a designated zone to resellers
- Doing logistics for goods and materials
- Any small job (ancillary) needed for the main activity
An ancillary activity is a task that must support the main job and can’t work by itself.
What Are Excluded Activities in UAE Corporate Tax Law?
Some business activities never get the tax break. These jobs are called excluded activities. If a business makes money from these, the money can’t count as qualifying income. These activities come from a list made by the government.
Main excluded activities include:
- Any business with a natural person (except for qualifying activities)
- Any banking, insurance, finance, or leasing (unless an exception applies)
- Owning or using immovable property (unless it’s a commercial property in a Free Zone and the deal is with another Free Zone company)
- Owning or using intellectual property (like patents, trademarks, or copyrights)
- Any job that supports these excluded activities
If you earn money from these activities, you can’t claim the qualifying income benefit.
How De Minimis Rules Work in Corporate Tax
The de minimis rule helps a business stay as a qualifying Free Zone person, even if it earns a little money from excluded activities. The law sets strict limits.
A company meets de minimis if non-qualifying income is:
- Less than 5% of total revenue or
- Less than AED 5,000,000
If your company’s non-qualifying income is below both limits, you can keep your status as a qualifying Free Zone person. But if you pass these limits, you lose the special tax treatment.
Why Do These Rules Matter for Businesses?
The UAE government wants everyone to be clear about tax rules. Knowing if your work is qualifying or excluded can help you:
- Pay the right amount of tax
- Avoid fines or penalties
- Make smart business plans
- Get advice from Mubarak Al Ketbi (MAK) Auditing for better results
If you don’t know your category, you could make costly mistakes.
Steps to Stay Compliant with UAE CT Law
Every business should:
- Check if it does qualifying or excluded activities
- Track all income from each activity
- Stay under the de minimis limit if possible
- Keep full records for every deal
- Get expert help from Mubarak Al Ketbi (MAK) Auditing
How Mubarak Al Ketbi (MAK) Auditing Can Guide Your Business
Sometimes, following the tax law can feel like you’re swimming against the tide. Mubarak Al Ketbi (MAK) Auditing helps you stay on top:
- We review your activities to see if you qualify for benefits.
- We help you keep records to meet de minimis rules.
- We update your business on every law change.
- We give expert advice for Free Zone and non-Free Zone work.
- We protect your business from fines and mistakes.
For more information:
- Visit our office: Saraya Avenue Building – Office M-06, Block/A, Al Garhoud – Dubai – United Arab Emirates
- Or contact/WhatsApp: +971 50 276 2132
