UAE Corporate Tax: Summary of FTA Private Clarifications issued up to May 2026
Created By :
Yeeshu Sehgal | UAE Tax Lead
Since Corporate Tax went live, taxpayers have been submitting private clarification requests to the FTA on grey areas the law doesn't spell out in plain terms. The FTA has now consolidated the answers to many of these into a single summary document, covering everything from Free Zone substance to Participation Exemption to Tax Groups. Read together, these clarifications are less about new rules and more about how the FTA is actually interpreting the rules already on the books, which makes this essential reading for anyone relying on 0% treatment, exemptions, or group relief.
Background
The document provides a consolidated summary of FTA private clarifications issued up to May 2026, with a strong focus on Free Zone Persons, investment structures, partnerships, family foundations, registration, and accounting-based CT computation. It is especially useful for businesses that want to align their tax position with the FTA’s current interpretive approach rather than relying only on the statutory text.
A private clarification is a taxpayer-specific ruling, it technically only binds the FTA in relation to the person who asked for it. But in practice, once the FTA publishes a summary of the reasoning behind dozens of these rulings, it becomes the closest thing to informal guidance on how borderline cases will be assessed.
Free Zone treatment
The clarifications reinforce that Qualifying Free Zone Person status depends on meeting the full statutory and substance conditions, not merely being incorporated in a Free Zone. The FTA also clarifies that branches are generally assessed collectively with the main entity where relevant, while a branch outside the Free Zone may be treated as a domestic or foreign permanent establishment.
The document also provides detailed guidance on what counts as qualifying income and qualifying activities, including holding shares for investment purposes, wealth and investment management services, headquarter services to related parties, treasury and financing services, logistics, distribution, ship-related activities, and reinsurance.
Free Zone substance: passive doesn't mean exempt from the test
A recurring theme across the clarifications is that adequate substance is assessed activity-by-activity, and passive or asset-based activities don't get a pass. For example, a Free Zone Person renting out property to Related Parties with no employees at all was found not to meet the substance test. Leasing still requires dedicated personnel for contract administration, compliance monitoring, and lease renewals.
On the other hand, the FTA confirmed some welcome flexibility:
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Employees can hold visas issued by another Related Party and still count toward a Free Zone Person's substance, provided that entity bears the economic cost and controls the employment relationship.
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A shared workspace can satisfy the substance test, as long as it's genuinely sufficient for the scale of the Qualifying Activity being carried out.
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If a Taxable Person misses arm's-length pricing in its financial statements but corrects it via a transfer pricing adjustment in the Corporate Tax return, that alone won't disqualify it from QFZP status for the period.
Permanent Establishment: the "no trade licence" trap
The FTA confirmed that a Non-Resident Person can have a UAE Permanent Establishment even without a trade licence. The absence of a licence is not, by itself, proof there's no fixed place of business. The key test remains whether the UAE presence is used to carry out core income-generating activities rather than merely preparatory or auxiliary ones, generally assessed over an aggregate presence of more than six months in a 12-month period. This is a useful reminder for groups that assume “no license, no PE”.
Qualifying Activities: Several helpful clarifications
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Holding shares for investment purposes can still qualify even if shares are held for less than 12 months, provided the intention was to hold for at least 12 months and this intention is assessed at the overall portfolio level, not transaction-by-transaction.
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Headquarter services can be provided to just one Related Party and still qualify, provided they serve the wider benefit of the group but self-financing a company's own funds for related companies is not headquarter services (it may instead qualify as treasury and financing services).
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Wealth and investment management services must be advisory or holistic in nature; pure execution/brokerage services (including matched-principal brokerage) don't qualify on their own, though they can be an ancillary activity if the main qualifying service is also provided.
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Distribution activities require the customer to be a reseller, not an "end-user”, goods incorporated into a customer's own infrastructure or retained assets fall outside the qualifying activity, so due diligence (KYC-style checks, undertakings, contracts) matters here.
Registration: A reminder that "dormant" isn't a defence
Several clarifications hammer the same point: registration is rarely optional. A juridical person without a trade licence and not carrying on any business must still register unless specifically exempt. Incorporated partnerships must register. Even a US company with a UAE branch whose income is exempt under a bilateral treaty still must register and file the exemption affects the tax outcome, not the filing obligation itself.
Practical Takeaways
None of these clarifications rewrite the Corporate Tax Law, but together they show the FTA is applying it with more nuance and more scrutiny than a first read of the legislation might suggest. Businesses relying on Free Zone substance, PE operations, and more should revisit their positions against this guidance specifically, rather than assuming last year's filing approach still holds.
For businesses approaching filing or restructuring decisions, the message is clear: review the facts, not just the entity label. Substance, documentation, activity mapping, and accounting treatment will often determine the Corporate Tax outcome.
How can we help?
AKM Global can support businesses in reviewing the impact of these clarifications on their UAE Corporate Tax position. This can include Free Zone status reviews, qualifying activity analysis, PE risk assessment, registration checks, and return-position support. We can also help map the clarifications to a group’s actual structure and identify where the tax position is strong, where further documentation is needed, and where a restructuring or compliance fix may be advisable.