Understanding UAE's Corporate Tax: A call for responsible compliance

As the UAE ushers in a new era of fiscal accountability through the implementation of its new corporate tax law, one principle must be clearly understood by all: compliance with the law is not a choice — it is a responsibility.

While the UAE’s 9 per cent corporate tax rate remains globally competitive, the focus now shifts to how well businesses understand, interpret, and implement the law in good faith. Unfortunately, there remains significant misunderstanding in the market, particularly around concepts such as Qualifying Free Zone Persons (QFZP) and holding companies.

Many assume that simply holding a free zone licence guarantees tax exemption. In reality, QFZP status is subject to strict conditions, including, but not limited to, substance, audited financials, qualifying income, and transfer pricing compliance.

This issue is even more critical when considering that SMEs make up over 95 per cent of registered businesses in the UAE. These businesses form the backbone of the economy, yet many lack structured tax advisory support and are at risk of non-compliance due to misinformation or neglect.

Always remember ignorance of law is not an excuse for the mistake and hence one should place extreme importance in learning the law and making the most appropriate decisions that adhere to the law of the land.

Tax compliance is not about finding advisors who promise zero tax, but about conducting a proper assessment of your business model, legal structure, and financials to determine your true tax position under the law.

The Federal Tax Authority has provided clear guidance through cabinet decisions and ministerial clarifications and through its various training sessions and now it is up to businesses to act and abide wisely.

Ignoring the law or seeking shortcuts can lead to tax audits, penalties, and reputational harm. Embracing the law, documenting positions, and filing timely and correctly is the way forward.

“The strength of a business lies not in avoiding tax, but in understanding the law, applying it responsibly, and growing with integrity,” says Priju Dominic, CEO & Founder, Dominic & Partners.