TaxSavvyAE

Testing the de minimis limit

How do I calculate the de minimis limit for my free zone company?

The situation

Non-qualifying revenue must not exceed the lower of 5 percent of total revenue or AED 5 million in the period. Some income, like certain property income, is left out of the test.

The law

  • Cabinet Decision 100 of 2023: De minimis requirement for Qualifying Free Zone Persons

What it means for you

Example: total revenue AED 12 million, non-qualifying revenue AED 500,000. Five percent is AED 600,000, which is below AED 5 million, so the limit is AED 600,000 and you pass. At AED 700,000 you would fail. Track it monthly, not at year end.

What to do

  1. Tag revenue lines as qualifying or not.
  2. Compute 5 percent of total revenue.
  3. Take the lower of that and AED 5 million.
  4. Compare with non-qualifying revenue every month.

We can do this for youQualifying Free Zone Person review and return: substance, qualifying income, de minimis test and audited accounts: AED 6,000

Related