1. Corporate Tax as a structuring and governance issue
Corporate Tax has made existing structures more visible. Entities set up for licensing, operational or cost reasons may no longer reflect commercial reality — especially groups with several mainland and Free Zone companies, shareholders in different jurisdictions, or informal related-party arrangements. Where income, costs, people, intellectual property, contracts and risk sit across entities without clear documentation, a structure that worked commercially before Corporate Tax may need review.
It also raises governance questions. Boards and shareholders may need to show why a restructuring was undertaken, why assets moved, why one group company charges another, or why a Free Zone entity is treated a particular way. Minutes, resolutions, agreements, valuations and internal memoranda become evidence of commercial purpose. The strongest positions are those where the legal documents, the accounting treatment, the actual conduct and the commercial rationale align; where they diverge, the issue is no longer only about tax — it becomes one of substance, authority, enforceability and evidence. Legal review is most useful where the position depends on structure, contracts, ownership, governance or dispute strategy rather than on computation alone — and it is worth more before a restructuring, a transaction or a response to the Federal Tax Authority (FTA) than after.
2. Group structuring and restructuring
UAE groups tend to grow incrementally — one entity, then Free Zone companies, branches, a holding company, foreign subsidiaries — until the structure is harder to justify. A structuring review asks which entity earns the income, employs the staff, owns the assets, performs the management functions, contracts with customers and carries the risk, and whether the group’s documents support those positions.
Corporate Tax does not require every group to restructure; often the right answer is to document and rationalise what already exists. Where restructuring is appropriate, the commercial rationale should be recorded at the time: a change made only to obtain a tax outcome carries risk under the general anti-abuse rule, whereas one supported by operational, regulatory, financing, shareholder or market-entry reasons is far easier to defend. Reliefs such as Qualifying Group Relief and Business Restructuring Relief can allow intra-group transfers without an immediate charge, but they depend on meeting their conditions and on proper documentation — legal title, valuation, board approval, contractual transfer and any clawback period all matter. Moving contracts, transferring employees, shifting assets or centralising management also carries employment, licensing, contractual and shareholder consequences that should be worked through first. This sits within our Corporate & Commercial practice.
3. Free Zone entities and the 0% regime
The legal issue is rarely the Free Zone licence alone: it is whether the licence, the contracts, the actual activity, the substance, the counterparties and the income profile support the treatment being claimed. Free Zone treatment is one of the most commercially sensitive areas in the regime, and incorporation in a Free Zone does not by itself secure the 0% rate. A Qualifying Free Zone Person (QFZP) must earn qualifying income, maintain adequate substance in the UAE, stay within the de minimis limit for non-qualifying income (the lower of 5% of total revenue or AED 5 million), not elect to be taxed at the standard rate, meet the arm’s-length and transfer-pricing requirements, and maintain audited financial statements. Failing any single condition can forfeit QFZP status for that tax period and the following four.
Contracts are usually central to the analysis. A customer, distribution, agency, warehousing, IP-licence or intercompany agreement can support or undermine the position by how it describes the activity, where obligations are performed and who the counterparty is. Where the licensed activities, the contract wording, the accounting records and the actual conduct diverge — a Free Zone company serving mainland customers, using mainland staff or premises, or earning income outside its expected profile — uncertainty rises. The objective is a defensible structure supported by real activity, clear contracts and consistent records, not a paper one.
4. Transfer pricing and related-party documentation
Transfer pricing is often treated as an economics question; in practice it has a substantial legal-documentation component. Related-party dealings — management and service fees, IP royalties, shareholder loans, cost-sharing, treasury functions, secondments, guarantees, commissions, asset transfers — should not exist only as accounting entries. They should be supported by agreements that identify the parties, services, pricing mechanism, risk allocation, duration and authority, and those agreements should reflect what actually happens.
The compliance overlay is now concrete. A Transfer Pricing Disclosure Form is filed with the annual Corporate Tax return where related-party transactions exceed the relevant thresholds; payments and benefits to a connected person above AED 500,000 are disclosed; and Master and Local Files must be produced to the FTA where the group meets the revenue thresholds. The FTA may request supporting documentation in the course of reviews, audits or information requests, and businesses should be prepared to explain both the pricing and the legal basis for the arrangement. Payments to founders, directors, officers or family members need particular care — salary, director’s fee, dividend, management charge, reimbursement, loan repayment or service fee each carry different legal and tax consequences, and ambiguity creates avoidable risk. Where royalties or licences are involved, this coordinates with our Commercial IP – UAE practice. Legal counsel supports the transfer-pricing analysis by ensuring that contracts, board approvals, authority records and actual conduct are consistent with the position being taken.
5. Cross-border groups: Pillar Two and the Domestic Minimum Top-up Tax
Large multinational groups must read the UAE position within the global minimum-tax framework, not through domestic law alone. The UAE Domestic Minimum Top-up Tax (DMTT) applies for financial years beginning on or after 1 January 2025 to UAE constituent entities of multinational groups with consolidated annual revenue of at least EUR 750 million in at least two of the four preceding financial years. It is designed to top up the effective tax rate to 15% where the rules apply, including where UAE entities otherwise benefit from 0%, 9% or Free Zone treatment. The UAE has aligned the DMTT with the OECD GloBE rules; at this stage it has not adopted the Income Inclusion Rule.
From a legal standpoint the issue is evidence and consistency. A UAE entity’s role — regional headquarters, holding company, IP owner, financing entity, distributor or service hub — should be clear in its constitutional documents, board records, intercompany agreements and employment arrangements, and should match the group’s global reporting. Inconsistency between the local documents and the global tax narrative is where difficulty arises, particularly when different authorities review the same group from different angles. Not every UAE structure is affected — the DMTT is aimed at the largest groups — but those groups should ensure their UAE records match their Pillar Two position.
6. Permanent establishment, foreign companies and effective management
Foreign companies can create UAE Corporate Tax exposure through their people, decisions or arrangements here. A permanent establishment can arise from a fixed place of business, or from dependent agents who habitually conclude contracts, where the activity goes beyond the merely preparatory or auxiliary. Separately, a foreign entity effectively managed and controlled from the UAE — where the strategic decisions are actually taken here — may itself be exposed. The test is tax-technical, but the evidence is legal: contracts, employment arrangements, authority matrices, board minutes, meeting locations and actual conduct.
For cross-border groups, the UAE position should be consistent with the parent and other operating jurisdictions — a structure described as limited-risk in one country and entrepreneurially managed in another invites questions. The practical safeguards are legal ones: agency and distribution agreements that reflect who really negotiates and binds the group; employment and secondment terms that match where people work and what authority they hold; and board and delegation records that show where decisions are actually made. Where personnel, consultants or representatives support regional activity from the UAE, the arrangement should be documented before it is relied upon, not reconstructed afterwards.
7. M&A, share sales, asset transfers and holding structures
Corporate Tax is now material in UAE M&A. A buyer should understand the target’s tax profile — Free Zone status, related-party dealings and transfer-pricing support, historic restructurings, losses, uncertain positions, founder remuneration, permanent-establishment exposure and any open FTA correspondence — which usually runs deeper than registration or filing. Sellers benefit from preparing a clean file before diligence begins.
Transaction documents should allocate tax risk explicitly: tax warranties, covenants and indemnities, disclosure schedules, conduct-of-dispute clauses and, where exposure is uncertain, escrow, retention or a price adjustment. The practical question is rarely whether a risk exists in the abstract but who bears it — buyer, seller, target, shareholders or insurer — which is a drafting and negotiation question. Group and holding decisions sit alongside: forming or changing a tax group (available where the ownership and control tests are met) affects losses, liabilities and future exit options; the participation exemption can relieve dividends and gains on qualifying shareholdings; and a UAE holding company should have real governance, board records and documentation of its role. Where a position becomes contentious, see our Dispute Resolution practice; property-holding structures intersect with Real Estate – UAE.
8. Financing, shareholder loans and intra-group debt
Corporate Tax has raised the stakes on documenting funding. The first question is characterisation — is the instrument debt, equity or something else? A payment recorded as a loan should have loan documentation, repayment and interest terms and approvals; if it is subordinated, convertible, interest-free or repayable on demand, that should be stated. Related-party financing may also need transfer-pricing support — interest, guarantees, cash pooling and treasury charges should be commercially justifiable and documented — and the terms should be consistent with company law, shareholder arrangements and any banking covenants.
For private-equity-backed companies, family businesses and multinational groups, intra-group debt is a Corporate Tax-sensitive area where the legal form, the accounting treatment and the tax analysis should align before implementation. Where a group company guarantees, funds or provides security for another without compensation, the legal and tax consequences of that support should be considered and recorded; and shareholder approvals or amendments to existing facilities may be needed so that the funding is enforceable and consistent with the rest of the group’s arrangements.
9. Family businesses, foundations, family offices and investment funds
Corporate Tax reaches family businesses, family offices, foundations and private-wealth and fund structures wherever they hold shares, manage investments, charge fees, employ staff or transact with related parties. ADGM and DIFC foundations are common for succession and holding; where a foundation holds operating shares, portfolios or family assets, its position turns on purpose, activities, governance and income — who controls it, how council decisions are made, and whether payments to family members and related entities are documented. Family offices that charge management fees, employ personnel or service family entities need the same discipline.
On the funds side — often in the DIFC or ADGM — the treatment of the fund, the investment manager, management fees and carried interest, and the GP/LP and advisory arrangements should be coherent across regulatory, tax and legal analysis. The investment management agreement should be clear on services, discretion, remuneration, delegation, conflicts and termination; carried interest and performance fees should be characterised carefully, given their tax, regulatory, partnership and employment dimensions; and a UAE manager acting for a foreign fund, or a foreign manager using UAE personnel, raises the same permanent-establishment and substance questions. This work may also intersect with our wills and succession work where family ownership, foundations or intergenerational transfers are involved, and — for licensed, payments and investment businesses — with Fintech – UAE.
10. GAAR, defensive documentation and FTA disputes
The general anti-abuse rule makes commercial purpose decisive: a transaction or restructuring should be explicable by business, regulatory, financing, shareholder or succession reasons, not by a tax outcome alone. Defensive documentation is not paperwork manufactured after the event — it is recording the rationale at the time, in board papers, legal memoranda, valuations, step plans and approvals.
As the regime matures, businesses should expect more FTA interaction — information requests, clarifications, audits, assessments, penalties and reconsideration requests. A strong response coordinates the company, its accountants and tax advisers, and legal counsel: the factual record organised, the documents consistent, the legal position clear, and the deadlines for reconsideration and appeal observed. Corporate Tax disputes turn on contracts, board approvals, authority, substance and commercial rationale as much as on numbers — where early legal preparation can materially improve the quality of the response.
Where legal counsel is engaged, a dispute also raises questions that sit naturally with lawyers: how the evidence is assembled and presented; whether legal advice attracts privilege or confidentiality and how that is preserved; keeping board minutes, approvals and correspondence intact so the contemporaneous record survives; and aligning the factual, accounting and legal positions so they tell one coherent story. Consistency matters across tax years, group entities and jurisdictions — a position taken for one company or period should not quietly undercut another — and a response to an assessment or penalty is best built with the reconsideration and appeal stages in mind from the outset, not bolted on later. For contentious matters, see our Dispute Resolution practice.
Across these areas, our role is to ensure the legal structure, the documents and the governance records support the tax position taken — working alongside your accountants, auditors and tax advisers.