Manufacture of other electrical equipment

Manufacturing of electrical equipment is a Qualifying Activity under the Free Zone regime. Forensic auditors will apply the 'Substantial Transformation' test to ensure the process results in a new product with a different ISIC classification. If the transformation is deemed insufficient, the income will be re-characterized as 'Trading' or 'Distribution', which requires the entity to be located in a Designated Zone and deal only with Qualifying Persons to maintain the 0% rate.

Audit Red Flag

Misclassification of 'Simple Assembly' or 'Repackaging' as 'Manufacturing' to bypass the stricter substance requirements of the Qualifying Activity status.

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