If your business is based in a UAE Free Zone, you may qualify for a 0% corporate tax rate as a Qualifying Free Zone Person (QFZP). To maintain this status, ensure that:

✅ Your business earns Qualifying Income (e.g., income from foreign clients or Free Zone-to-Free Zone transactions).
✅ Your Non-Qualifying Revenue (e.g., UAE mainland transactions) does not exceed 5% of total revenue or AED 5 million, whichever is lower.
✅ You maintain adequate substance, such as office space and employees in the Free Zone.

Example:
Company A, a Free Zone IT firm, provides software services only to international clients and meets all QFZP conditions. This allows the company to enjoy a 0% corporate tax rate, saving thousands annually.

🔹 Key Takeaway: If you operate in a Free Zone, structure your business transactions carefully to retain 0% tax eligibility.

Businesses can claim depreciation deductions on fixed assets (machinery, equipment, vehicles) to reduce taxable income. Certain assets may qualify for accelerated depreciation, allowing companies to expense 100% of the cost in the first year.

Example:
Company B purchases machinery worth AED 1 million. Under normal depreciation, the deduction would be AED 200,000 per year for five years. However, by using accelerated depreciation, Company B claims the full AED 1 million deduction in year one, reducing taxable income significantly.

🔹 Key Takeaway: Use capital allowances and depreciation deductions to lower taxable profits and reinvest in business growth.

If your company has transactions with related entities in different countries, ensure they comply with transfer pricing rules to minimize tax liabilities. Charging arm’s-length service fees to a Free Zone entity can shift profits to a 0% tax jurisdiction.

Example:
A UK-based company (taxed at 25%) sets up a UAE Free Zone subsidiary (0% tax). The UK entity pays high service fees to the UAE subsidiary, shifting taxable profits to the UAE, where they are taxed at 0%.

🔹 Key Takeaway: Properly structured transfer pricing can help reduce global tax exposure, but ensure compliance with UAE’s tax laws.

The UAE allows businesses to receive dividends tax-free if they meet the Participation Exemption rules. This is beneficial for holding companies managing foreign subsidiaries.

✅ The UAE entity must own at least 5% of the foreign company.
✅ The foreign subsidiary must be taxed at 9% or more.
✅ The UAE company must hold the shares for at least 12 months.

Example:
Company C, based in a UAE Free Zone, owns 10% of a German subsidiary (corporate tax 15%). The subsidiary pays AED 2 million in dividends to Company C, which is not taxed in the UAE, saving AED 180,000 in corporate tax (9% of AED 2M).

🔹 Key Takeaway: Holding structures can help avoid double taxation and keep profits tax-free.

If a company incurs losses, it can carry them forward to offset future taxable income, reducing corporate tax liability in profitable years.

✅ Losses can be carried forward indefinitely.
✅ Up to 75% of taxable income can be offset with previous losses.

Example:
Company D incurs a AED 2 million loss in 2024 but earns a AED 3 million profit in 2025. By applying the carry forward rule, AED 2 million offsets taxable income, meaning the company pays tax only on AED 1 million, reducing its tax bill by AED 180,000.

🔹 Key Takeaway: If your business operates at a loss, plan ahead by carrying forward tax losses to reduce future corporate tax bills.

The UAE corporate tax system allows deductions for legitimate business expenses, including:

✅ Employee Salaries & Benefits
✅ Marketing & Advertising Costs
✅ Rent & Utilities
✅ Interest on Business Loans (subject to limitations)
✅ Professional & Consultancy Fees

Example:
Company E spends AED 500,000 on employee salaries and AED 200,000 on marketing. These expenses reduce taxable income by AED 700,000, saving AED 63,000 in corporate tax (9% of AED 700K).

🔹 Key Takeaway: Track and document all legitimate business expenses to lower taxable profits legally.

Although the UAE does not yet offer dedicated R&D tax credits, businesses can still expense R&D costs, reducing taxable income.

Example:
Company F, a tech startup, spends AED 1 million on AI research. If the entire cost is deductible, the company reduces its taxable income by AED 1 million, saving AED 90,000 in taxes.

🔹 Key Takeaway: Investing in R&D can provide long-term tax benefits while driving innovation.

UAE corporate tax allows group tax relief, meaning related entities can transfer losses within a qualifying group, reducing overall tax liability.

✅ Entities must have at least 75% common ownership.
✅ Losses from one company can offset profits of another entity in the group.

Example:
Company G (holding company) owns 80% of Company H and Company I. Company H makes a profit of AED 4 million, while Company I incurs a loss of AED 1 million.

Instead of paying tax on AED 4 million, the group structure allows Company G to offset Company I’s loss, reducing taxable income to AED 3 million and saving AED 90,000 in taxes.

🔹 Key Takeaway: Structuring businesses under a group tax framework can reduce overall tax payments.

By implementing these eight strategies, businesses in the UAE can significantly reduce their corporate tax liabilities while remaining compliant. Effective tax planning ensures that companies reinvest savings into growth and expansion.

🔹 Need expert tax planning?
Reach out to Fastlane Consultancy for a detailed corporate tax assessment and tailored tax strategies on how to effectively reduce your tax liability! 🚀