Corporate Tax Disputes in the UAE
Registration penalties, deductible expenses, related-party transactions, Small Business Relief, and free zone QFZP status.
The UAE introduced Corporate Tax under Federal Decree-Law No. 47 of 2022, applicable to financial years starting on or after 1 June 2023. The real challenge is not only the rate, but registration, classification, filing, documentation, free zone status and related-party transactions.
Corporate Tax facts
| Rate | 0% on taxable income up to AED 375,000, and 9% on taxable income exceeding that amount. |
| Return and payment | Within 9 months from the end of the financial year. |
| Registration | Required for most taxable persons, even if income is below the threshold, according to applicable decisions. |
| Small Business Relief | Available for resident persons where revenue does not exceed AED 3 million, for tax periods starting on or after 1 June 2023 and ending on or before 31 December 2026, subject to conditions. |
| Free zones / QFZP | A 0% rate may apply to qualifying income if the conditions for a Qualifying Free Zone Person are met. |
Main sources of Corporate Tax disputes
- Late registration penalties or non-compliance with FTA requirements.
- Confusion between taxable income, exempt income and qualifying income.
- Issues concerning Qualifying Free Zone Person (QFZP) status.
- Rejection or adjustment of deductible expenses.
- Related-party transactions and transfer pricing.
- Failure to maintain sufficient documents and internal resolutions.
- Errors in the annual return or late filing.
When should the company act?
- Before submitting the first return if classification is unclear.
- Upon receiving a registration penalty or FTA notice.
- If the company is in a free zone and expects to benefit from QFZP status.
- When there are related parties or transactions with sister companies.
- Before making a major financial decision that may affect taxable income.
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Free zone companies and QFZP status
Free zone companies are not automatically exempt from Corporate Tax. Some may benefit from a 0% rate on qualifying income if they meet the conditions of a Qualifying Free Zone Person (QFZP). Activities, clients, contracts, revenue and economic substance must therefore be reviewed carefully.
Key areas of QFZP disagreement
- Is the activity within the qualifying activities?
- Is the income from a mainland customer, within the free zone, or outside the UAE?
- Does the company have adequate economic substance in the UAE?
- Are there transactions with related parties?
- Has the arm’s length principle been applied?
- Has the company exceeded the allowed de minimis threshold for non-qualifying income?
How we help free zone companies
- Reviewing the activity, license and contracts.
- Analyzing income sources and revenue classification.
- Assessing the risk of losing QFZP status.
- Preparing an internal memorandum clarifying the company’s position.
- Supporting the company when receiving a request or decision from the FTA.
Send us the decision. We'll review it properly.
Initial review · No obligation · info@summitlegaluae.com