When a qualifying free zone person (QFZP) engages in intellectual property asset research and development (R&D), some income generated from qualifying intellectual property (QIP) assets may be eligible for zero percent corporate tax; however, any income from non-QIP assets and non-qualifying QIP assets is subject to a flat nine percent tax rate. Income subject to the nine percent tax rate will not be considered when applying the de-minimus test.
Intangible assets such as patents, copyrights, software protected by copyright, formulas, trademarks, brands, and technical know-how legally owned and registered under an individual’s name are called intellectual property. These intangible assets fall into one of two categories: non-QIP or QIP.
Intangible assets not being used for commercial purposes but registered in accordance with the laws governing intangible assets in the United Arab Emirates or a relevant foreign jurisdiction are included in the QIP asset. For example, even if applicable laws protect a trademark, it cannot be considered a QIP asset if it is used exclusively for one’s own business.
Profits from QIP assets may be eligible for qualifying income under a particular formula specified in the Guide and applicable Ministerial Decision. The following is this formula: The ratio of qualifying expenditures plus uplift expenditures to total expenditures multiplied by overall income is known as qualifying income. The formula needs the total numbers for the QIP asset’s lifetime.
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