The UAE corporate tax law offers significant advantages for businesses operating in free zones, particularly with a 0% corporate tax rate applicable to transactions within these areas. This provision is especially relevant for Qualifying Free Zone Persons (QFZPs), who can benefit from this tax rate when they earn qualifying income from specific activities, even if goods or services are sold to non-free zone individuals.

According to the UAE Federal Tax Authority (FTA), QFZPs are eligible for the 0% corporate tax rate when their income is derived from qualifying activities. These activities encompass manufacturing, trading of commodities, and providing logistics services among others. Logistics services are crucial as they include various operations such as the storage and transportation of goods on behalf of clients without taking ownership of those goods.

Johnson M. George, General Manager of Umm Al Quwain Free Trade Zone, emphasized that logistics services, when properly structured within a Designated Free Zone, qualify under the UAE corporate tax regime. He noted the importance of meeting substance requirements and adhering to FTA guidelines to facilitate compliant cross-border trade.

Logistics services cover a broad range of activities, including cargo handling, warehousing, and customs brokerage. The law does not impose restrictions on the delivery methods, allowing for flexibility in logistics operations. However, it is important to clarify that logistics services do not include the transportation of people.

The FTA’s corporate tax guide also mentions that certain ancillary activities may qualify alongside the main logistics activities. These must closely relate to the primary logistics services and enhance their functionality, such as supply chain management and customer service.

Last mile delivery services are a critical aspect for logistics providers in free zones. If a free zone logistics entity offers most of its services within the zone but conducts last mile deliveries outside the zone, these services are still considered part of the qualifying logistics activity.