UAE Corporate Tax & ESR: Building Substance and Governance that Survive Scrutiny

With 9% corporate tax in force and Economic Substance Regulations (ESR) still biting, boards must align how value is created with where value is claimed—people, premises, decisions, and documentation. For Free Zone entities, the QFZP (Qualifying Free Zone Person) regime can reduce tax on qualifying income to 0%, but only if you meet tight conditions (income type, de-minimis rules, and anti-abuse safeguards) and can prove it with records.

The facts to anchor your strategy

• CT Law (Decree-Law 47/2022): Establishes the 9% regime and basic architecture. Policies, accounting segregation, and transfer pricing matter more than ever.

• ESR (MoF): Relevant Activities must show adequate people, expenditure, and premises in the UAE; annual notifications and reporting via MoF portal.

• QFZP Guide (FTA): Sets granular conditions (e.g., 5% de-minimis threshold for non-qualifying revenue) and examples where a Free Zone Person fails QFZP and loses 0% benefits. Tracking systems are critical.

• DMTT (MoF): Effective for financial years starting 1 Jan 2025, aligned to OECD Pillar Two for groups ≥ EUR 750million. Boards must assess exposure, data readiness and safe harbours.

What good governance looks like under CT+ESR

• Operating model clarity: Org charts, job descriptions, and board/committee ToR that match invoicing flows and where decision-making occurs.

• Substance MI: Headcount by function, timesheets (where relevant), premises evidence, outsourcing map, and cost allocation that supports ESR and transfer pricing positions.

• QFZP tracking: Systems to tag qualifying vs. non-qualifying income, monitor the 5% de-minimis, and produce working papers at year-end.

• Tax governance: Policy, RACI, issue log, periodic board reviews, and documentation of positions (incl. reliance on guides and decisions).

Signals you’re audit-ready

• Immediate production of ESR notifications/reports and supporting ledgers.

• Evidence of QFZP computations with tie-outs to financials.

• DMTT scoping memo (for MNEs) with data sources and responsible owners.

How Marensa helps

• Substance Blueprint: Role mapping, premises strategy, outsourcing guardrails aligned with ESR.

• QFZP/CT File Build: Policy pack, decision logs, income tracking methodology, year-end checklist, and sample reconciliations to financials.

• DMTT Readiness (for MNEs): Scoping, data dictionary, and safe-harbour analysis aligned to MoF releases.

• Outcome: A defensible CT+ESR posture with evidence that stands up to tax authority queries and bank KYC reviews.