Question 1

Who is subject to UAE Corporate Tax?

Accepted Answer

UAE Corporate Tax under Federal Decree-Law 47 of 2022 applies to: (i) all juridical persons incorporated in the UAE (mainland and free-zone), regardless of activity; (ii) UAE branches of foreign juridical persons; (iii) natural persons conducting business activities in the UAE generating turnover above AED 1 million per Gregorian calendar year (Cabinet Decision 49 of 2023); (iv) non-resident persons with a UAE permanent establishment, a UAE-source income nexus or a UAE-immovable-property nexus. Government entities, government-controlled entities, qualifying public benefit entities and certain pension/investment funds may be exempt subject to conditions. The standard rate is 9% on Taxable Income above the AED 375,000 threshold; the rate for Multinational Enterprises within scope of Pillar Two is 15% (Domestic Minimum Top-up Tax, effective 1 January 2025).

Question 2

What is a Qualifying Free Zone Person and the 0% rate?

Accepted Answer

A Qualifying Free Zone Person (QFZP) is a Free Zone Person that meets all conditions set by Cabinet Decision 100 of 2023 and Ministerial Decision 265 of 2023: (i) maintains adequate substance in the free zone; (ii) derives Qualifying Income (a defined list — including transactions with other free-zone persons in respect of qualifying activities, and certain transactions with non-free-zone persons in respect of qualifying activities); (iii) does not elect to be subject to the standard 9% rate; (iv) complies with the de minimis requirement (non-qualifying revenue cannot exceed the lower of 5% of total revenue or AED 5 million); (v) prepares audited financial statements; and (vi) complies with transfer pricing. QFZPs pay 0% on Qualifying Income and 9% on non-Qualifying Income. Loss of QFZP status (e.g. by breaching de minimis) is a five-year disqualification — a high-stakes outcome that justifies investing in pre-emptive structuring.

Question 3

When does the FTA conduct a Corporate Tax audit?

Accepted Answer

The FTA may conduct a tax audit at any time within five years of the end of the tax period (extended to fifteen years in cases of tax evasion). Audit triggers include: filing inconsistencies (turnover mismatch with VAT returns, balance-sheet movements without explanation); QFZP de minimis stress points; large related-party transactions without TP documentation; restructuring transactions; significant carry-forward losses; and risk-based selection algorithms. The FTA's Tax Procedures (Federal Decree-Law 28 of 2022 and Cabinet Decision 74 of 2023) govern audit conduct — including notification, records production, FTA powers of inspection, and the right to legal representation. The first 30 days of an audit shape the trajectory; we recommend partner involvement from the FTA notification letter onward.

Question 4

What transfer pricing documentation does the UAE require?

Accepted Answer

Transfer Pricing rules under FDL 47/2022 (Articles 34-36) and Ministerial Decision 97 of 2023 follow the OECD framework. Three-tier documentation: (i) Local File — required where the Taxable Person's revenue exceeds AED 200 million OR the MNE Group has consolidated revenue exceeding AED 3.15 billion; (ii) Master File — same thresholds; (iii) Country-by-Country Report — for MNE Groups with consolidated revenue exceeding AED 3.15 billion. The FTA may request TP documentation within 30 days of any request, including for taxpayers below the threshold. Transactions with Connected Persons must be at arm's length — both pricing and method must withstand FTA scrutiny.

Question 5

How does Pillar Two affect UAE businesses?

Accepted Answer

The UAE introduced a Domestic Minimum Top-up Tax (DMTT) effective for financial years starting on or after 1 January 2025 (Cabinet Decision implementing the OECD Pillar Two GloBE rules). UAE constituent entities of MNE Groups with consolidated revenue exceeding EUR 750 million in two of the four preceding years are subject to a 15% effective rate on UAE-sourced GloBE Income. The DMTT credits against the 9% Corporate Tax — meaning a UAE entity in a Pillar Two MNE pays the higher of 9% CT or 15% DMTT. Substance-Based Income Exclusion (SBIE) provides relief for substantive operations. The interaction with QFZP 0% status is the largest planning point: a QFZP MNE may still owe DMTT to the UAE.

Question 6

What is the voluntary disclosure mechanism?

Accepted Answer

Federal Decree-Law 28 of 2022 (Tax Procedures) Article 10 requires a Taxable Person who becomes aware that a submitted return contained an error to file a Voluntary Disclosure within 20 business days of becoming aware. Voluntary Disclosures attract reduced penalties (typically 1% per month from the original due date, capped) versus FTA-discovered errors (40% of unpaid tax plus a fixed penalty). Strategic considerations include: (i) precise scoping of the disclosure (over-disclosure is costly); (ii) timing relative to any pending FTA inquiry (a Voluntary Disclosure filed after the FTA has notified an audit may not qualify for the reduced penalty); (iii) sequencing with related TP and VAT positions. We run all three in parallel where the underlying issue is multi-tax.

Question 7

How does the reconsideration and appeal process work?

Accepted Answer

FTA assessments and penalty decisions can be challenged through a three-stage process: (1) Reconsideration — application to the FTA within 40 business days of the decision (extended to 90 in some cases under recent amendments); (2) Tax Disputes Resolution Committee (TDRC) — if the Reconsideration is unsuccessful, application within 40 business days; the TDRC sits independently with mixed judicial and tax composition; (3) Federal Court of First Instance — appeal within 60 days of the TDRC decision, with onward appeal rights to Court of Appeal and Court of Cassation. Critical procedural points: standing, time-bar discipline, payment of undisputed amounts (a precondition for some stages), and grounds-of-challenge framing — the grounds raised at Reconsideration largely lock the framing for the entire appeal.

UAE Corporate Tax — from QFZP structuring to FTA audit defence.

What we do for taxpayers and tax functions.

Compliance & structuring

Transfer pricing

Audit & controversy

Pillar Two & international

Frequently asked questions

Facing an FTA audit or planning a UAE structure?