Research and development (R&D) of intellectual property assets by a qualifying free zone person (QFZP) may result in a portion of income from qualifying intellectual property (QIP) assets being eligible for zero percent corporate tax; non-qualifying income from QIP assets and income from non-QIP assets is subject to a flat nine percent tax rate; income subject to the nine percent tax will not be taken into account when applying the de-minimus test.
Suppose there is a clear correlation between the income from the QIP asset and the qualified research and development costs that went into creating that income. In that case, a QFZP can produce qualifying income from the QIP asset. The income component associated with the acquisition cost or outsourced R&D does not qualify as qualifying income when a QFZP acquires a QIP asset or contracts R&D services to a related party outside the United Arab Emirates.
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.
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