Key Takeaways
4 insights · 11 min readTreasury and financing services to Related Parties are a Qualifying Activity under Ministerial Decision No. 229 of 2025 — intra-group interest can be taxed at 0% rather than 9%.
Financing anyone outside the group is a different animal. Finance and leasing activities are an Excluded Activity, so a single third-party loan can push you past the de minimis limit.
The borrower’s side is capped too: net interest expenditure above AED 12,000,000 is deductible only up to 30% of adjusted EBITDA, with the excess carried forward for 10 tax periods.
Interest-free or round-number intra-group loans do not survive review when the lender sits at 0%. Arm’s length pricing applies from the first dirham — there is no AED 3 million threshold.
Yes — treasury and financing services to Related Parties are a Qualifying Activity under Ministerial Decision No. 229 of 2025, so a UAE free zone treasury centre can earn 0% corporate tax on intra-group interest and treasury fees. Lending to anyone outside the group is an Excluded Activity and is taxed at 9%.
In this guide
What the activity covers Qualifying vs excluded Lending outside the group Pricing intra-group loans TP documentation thresholds Interest deduction limits De minimis worked example Substance for a treasury centre Audited accounts Cost of a breachIf your group has parked its cash management, intra-group lending and hedging in a UAE free zone entity, treasury and financing services is the qualifying-activity line you are relying on. Done properly, the interest and fees that entity earns from group companies are taxed at 0% corporate tax. Done loosely, the same entity is a 9% taxpayer with a five-year lock-in and a transfer pricing problem attached. The distinction almost always turns on two things: who you lend to, and whether the rate you charge would survive an arm’s length test. This guide works through both, plus the interest deduction cap that hits your borrowers on the other side of the loan. If you would rather have the structure reviewed than read about it, our corporate tax team checks free zone positions before the return is filed.
What are treasury and financing services under the QFZP rules?
Treasury and financing services to Related Parties is a listed Qualifying Activity in Article 2 of Ministerial Decision No. 229 of 2025, which replaced MD 265/2023 and applies to tax periods beginning on or after 1 June 2023. Income a Qualifying Free Zone Person (QFZP) earns from it is Qualifying Income taxed at 0%.
The category is broader than intra-group lending alone. In practice it covers the functions a real group treasury runs: entering into debt and equity financing arrangements for group companies, cash and liquidity management including pooling, providing loans and other financing to Related Parties, debt management and refinancing, and financial risk management such as foreign exchange and interest rate hedging on behalf of the group.
Two structural points to fix early. First, this is a separate category from headquarter services — a group that runs both management and treasury out of the same entity is relying on two different qualifying activities with different exclusions, and each has to stand up on its own. Our guide to headquarter services and QFZP status covers the other side. Second, treasury activity carried on for the entity’s own account sits comfortably inside the category only while it is part of servicing the group; the moment the entity is deploying capital to outsiders, it is doing something else entirely.
Which treasury and financing services qualify for 0% corporate tax?
The test is the counterparty first and the activity second. Income is qualifying where the treasury service is provided to a Related Party — broadly 50% or more common ownership or control under Article 35 of the Corporate Tax Law — and where the activity is not caught by an Excluded Activity. Get the counterparty test wrong and no amount of documentation rescues the position.
| Treasury activity | Treatment | Why |
|---|---|---|
| Interest on loans to wholly-owned or 50%+ group companies | Qualifying — 0% | Financing provided to a Related Party under Article 2 of MD 229/2025 |
| Cash pooling and liquidity management for the group | Qualifying — 0% | Core limb of treasury services; the pool leader’s reward must still be arm’s length |
| Group FX and interest rate hedging | Qualifying — 0% | Financial risk management carried out for Related Parties |
| Arranging and managing external debt for group entities | Qualifying — 0% | Debt management and financing arrangements on behalf of Related Parties |
| Loans or invoice financing to a 40% held joint venture | Non-qualifying — 9% | Below the 50% Related Party threshold; this is third-party finance |
| Lending or leasing to unrelated businesses | Excluded Activity | Finance and leasing activities are excluded other than to Related Parties and aircraft |
| Any financing arrangement with a natural person | Excluded Activity | Transactions with natural persons are excluded for this category |
| Regulated banking activity | Excluded Activity | Activities regulated under Federal Decree-Law No. 14 of 2018 are outside the regime entirely |
Expert Tip
Run the 50% Related Party test on the borrower at every drawdown date, not once at incorporation. Groups dilute. A subsidiary that drops from 55% to 48% after an investment round quietly converts qualifying interest income into non-qualifying revenue from that date — and nobody notices until the audit.
Do treasury and financing services to non-Related Parties ever qualify?
No. Finance and leasing activities are an Excluded Activity, with only two carve-outs: treasury and financing services provided to Related Parties, and the financing and leasing of aircraft. Everything else — third-party lending, receivables finance for outside customers, equipment leasing to unrelated businesses, consumer credit — can never generate Qualifying Income, however the contract is drafted.
This is the single most expensive misunderstanding in the treasury category, because the amounts involved look trivial next to intra-group balances. A one-off AED 700,000 facility extended to a supplier, a bridging loan to a founder’s other company, an arrangement fee earned on a deal for an outside investor: each is small revenue, and each counts against a de minimis allowance that is usually only a few hundred thousand dirhams wide.
There is a licensing dimension too. Providing finance to third parties in or from the UAE is a regulated activity, and a free zone treasury company generally holds a holding, management or treasury permission rather than a finance licence. Booking third-party lending through that entity therefore risks a regulatory problem alongside the tax one. Keep external lending in a separate, appropriately licensed vehicle and the QFZP position stays clean.
⚠️ Interest from banks and outside investments is not automatically qualifying
Deposit interest, money-market returns and bond coupons earned on the treasury centre’s own surplus cash come from counterparties that are not Related Parties. Where that income is meaningful relative to total revenue, it needs to be assessed against the de minimis limit rather than assumed into the 0% bucket. Model the position before year end, not after. Get the revenue split reviewed →
✅ Keeps the 0% rate
- Every borrower tested at 50%+ ownership or control before drawdown
- Facilities priced off a standalone credit rating and benchmarked
- External lending written by a separate, licensed entity
- Treasury decisions taken and minuted in the UAE
- Interest and fees tagged by counterparty in the ledger
- Result: intra-group interest taxed at 0%
❌ Loses the 0% rate
- A facility extended to a 35% held JV or a founder’s outside company
- Round-number or interest-free loans with no supporting analysis
- Arrangement fees earned on deals for unrelated investors
- Loans booked in the UAE, decided and managed abroad
- Revenue reviewed once a year when the auditor arrives
- Result: 9% across five tax periods
How do you price intra-group loans at arm’s length?
Article 34 of the Corporate Tax Law requires every related-party transaction to be priced at arm’s length, and an intra-group loan is a related-party transaction in the purest form. For a QFZP treasury centre the scrutiny is higher than usual, because the lender is at 0% and the borrower is deducting at 9% — every basis point moves profit from a taxed rate to an untaxed one.
The workable method for most groups is the comparable uncontrolled price approach: establish a standalone credit rating for the borrower, identify the terms that actually drive pricing (currency, tenor, seniority, security, covenants, repayment profile), and benchmark against comparable third-party debt. Implicit group support, guarantees and letters of comfort all affect the rate and should be reasoned through rather than ignored.
- Interest-free intra-group loans — a nil rate between a 0% lender and a 9% borrower is not a neutral arrangement, and it will not be accepted without an arm’s length analysis supporting it.
- Cash pool leader remuneration — a pool leader performing a coordination function typically earns a routine service reward, not the full interest spread. Claiming the spread requires evidence the entity bears real credit and liquidity risk and has the capital to absorb it.
- Guarantee fees — where the treasury centre guarantees group borrowings, a fee is generally expected, priced on the benefit the borrower actually receives.
- Documentation — facility agreements, board approvals, drawdown schedules and the interest computation itself, all dated contemporaneously.
Charging intra-group interest with no benchmarking file behind it?
We build the loan pricing analysis, the intra-group agreements and the disclosure form as one piece of work alongside the CT return.
What transfer pricing documentation does a treasury centre need?
Start by discarding a number that circulates widely on UAE tax sites: there is no AED 3 million transfer pricing threshold. Arm’s length pricing is unconditional. What the thresholds determine is which forms and files you have to produce, and they sit far higher than most treasury centres expect.
| Requirement | Trigger | Treasury centre reality |
|---|---|---|
| Arm’s length pricing — Article 34 | Every related-party transaction, no threshold | Applies to the first intra-group loan you write, whatever its size |
| Transfer Pricing Disclosure Form | Aggregate related-party transactions of AED 40,000,000+ in the tax period | Loan principal, interest, guarantee fees and treasury fees aggregate quickly — most active treasury centres are inside this |
| Per-category reporting within that form | Any transaction category of AED 4,000,000+ | Interest income and financing arrangements are usually separate reportable categories |
| Master File and Local File | Own revenue AED 200,000,000+, or consolidated group revenue AED 3,150,000,000+ (MD 97/2023) | Produced to the FTA within 30 days of a request; most standalone treasury centres fall below on own revenue |
| Connected Person payments — Article 36 | No threshold | Interest paid to a shareholder or director is deductible only up to market value |
Note the trap in the disclosure test: it looks at aggregate related-party transactions, not net interest. A treasury centre with AED 6,000,000 of interest income can easily be over AED 40,000,000 once loan principal advanced and repaid, guarantees and pooled balances are counted. Our transfer pricing team assembles the disclosure alongside the return so the two agree.
How does the interest deduction limitation rule affect group financing?
Getting 0% on the lending side is only half the arithmetic. The borrower has to be able to deduct the interest, and UAE corporate tax caps that. Under the General Interest Deduction Limitation Rule in Article 30, net interest expenditure is deductible only up to the higher of 30% of adjusted EBITDA or AED 12,000,000. Anything disallowed carries forward for up to 10 tax periods.
Worked example: where the group actually pays
A UAE mainland trading subsidiary borrows from the group’s free zone treasury centre. Adjusted EBITDA for the year is AED 40,000,000 and net interest expenditure to the treasury centre is AED 15,000,000.
| Step | Calculation | Result |
|---|---|---|
| Safe harbour test | Net interest AED 15,000,000 vs AED 12,000,000 | Exceeded — rule applies |
| 30% of adjusted EBITDA | 30% × AED 40,000,000 | AED 12,000,000 |
| Deductible this period | Higher of AED 12,000,000 and AED 12,000,000 | AED 12,000,000 |
| Disallowed | AED 15,000,000 − AED 12,000,000 | AED 3,000,000 — carried forward 10 periods |
| Cash cost to the group this year | AED 3,000,000 × 9% | AED 270,000 |
The treasury centre still books the full AED 15,000,000 at 0%, but the borrower only relieves AED 12,000,000 — so the group carries AED 270,000 of tax it would not have paid had the debt been sized to the cap. Run the sizing before the facility is drawn, not at the return stage. The UAE corporate tax calculator is a quick way to sanity-check the borrower’s position.
There is a second, sharper rule to watch. The Specific Interest Deduction Limitation Rule in Article 31 denies a deduction for interest on a Related Party loan used to fund a dividend or distribution, a capital contribution, a share redemption or buy-back, or the acquisition of an ownership interest in a person who becomes a Related Party — unless the borrower can show the arrangement’s main purpose was not to obtain a corporate tax advantage. That is treated as demonstrated where the Related Party lender is taxed on the interest at 9% or more. A QFZP taxing the interest at 0% does not meet that safe harbour, so if your treasury centre funds one of those four transactions, the commercial rationale has to be evidenced on the facts. Worth knowing before the loan is signed rather than after.
How much non-qualifying revenue can a treasury centre earn?
A QFZP may earn non-qualifying revenue up to the de minimis limit — the lower of 5% of total revenue or AED 5,000,000. For treasury centres this bites unusually hard, because revenue is interest and fees rather than turnover, so total revenue is small and 5% of it is smaller still.
Worked example: a AED 700,000 facility that cost AED 1.7 million
Aurora Treasury FZ-LLC runs financing and cash management for a family-owned group. Its tax period is the calendar year.
| Line | Amount | Treatment |
|---|---|---|
| Interest from five wholly-owned subsidiaries | AED 9,000,000 | Qualifying — 0% |
| Interest and arrangement fee on a facility to a 35% held JV | AED 700,000 | Non-qualifying — below the 50% Related Party test |
| Total revenue | AED 9,700,000 | — |
| De minimis limit | 5% × AED 9,700,000 | AED 485,000 |
| Outcome | Over by AED 215,000 | QFZP status lost |
| Corporate tax on profit of AED 4,200,000 | (4,200,000 − 375,000) × 9% | AED 344,250 per period |
| Across five affected tax periods | — | approx. AED 1,721,250 |
The JV facility earned AED 700,000 and triggered roughly AED 1.72 million of corporate tax. Had the group held 50% of the JV, or had the facility been written by a different entity, the position would have held. Note also that while the treasury centre is a QFZP there is no AED 375,000 nil-rate band on its non-qualifying income — the band only reappears once QFZP status is gone, which is a poor consolation.
What substance does a UAE treasury centre need?
Adequate substance means the core income-generating activities happen in the free zone, with enough qualified full-time staff, operating expenditure and physical assets to make the income credible. Treasury is a thin-headcount function by nature, which makes the substance question sharper here than in most categories — a company earning AED 9,000,000 of interest with no treasury professional on its payroll is asserting that the income arises from decisions nobody in the UAE made.
For a treasury centre the core activities are the ones that create the return: deciding to advance, price and renew facilities; setting and monitoring counterparty and liquidity limits; executing and managing hedges; and bearing the credit and funding risk on the balance sheet. The last point matters most. If the parent decides everything and the free zone entity simply books the loan, the profit follows the decision-making, not the ledger entry.
Evidence worth keeping: employment contracts and residence visas for the treasury personnel, credit and treasury committee minutes with UAE-resident participants, approved treasury and counterparty policies, a real office proportionate to the balance sheet, and capital adequate to the risks assumed. Outsourcing is permitted to a Related Party or third-party provider in a free zone, provided the QFZP supervises it properly — supervision it must be able to demonstrate.
Do treasury and financing centres need audited financial statements?
Yes, every year the 0% rate is claimed. Audited financial statements are a hard condition of QFZP status, independent of revenue and independent of whether the free zone authority asks for an audit at licence renewal. A missing audit is a failed condition with exactly the same five-period consequence as a de minimis breach.
Statements must follow IFRS, be audited by a UAE-licensed auditor, and be supported by records retained for seven years. For a treasury centre the accounting is not trivial: financial instruments have to be classified and measured correctly, expected credit losses assessed on intra-group receivables, hedges documented if hedge accounting is applied, and foreign currency positions translated consistently. The ledger also has to separate qualifying from non-qualifying revenue by counterparty, because that is the only way the de minimis position can be evidenced.
Practically, run the corporate tax audit and the free zone licence audit as one engagement rather than two. Fastlane is a Ministry of Economy registered auditor across the major zones, including DIFC, DMCC and IFZA.
What does it cost if a treasury centre breaches a QFZP condition?
Failing any QFZP condition removes the 0% rate from the start of that tax period and for the four following tax periods — five periods at 9%, with no apportionment and no cure. For a treasury centre carrying a large interest book, that is the most expensive single outcome in the regime.
Filing and payment failures are penalised separately under Cabinet Decision No. 75 of 2023, as amended by Cabinet Decision No. 10 of 2024. These are corporate tax penalties and should never be quoted from the VAT and excise regime in Cabinet Decision No. 129 of 2025 — different authority, different amounts.
| Failure | Penalty | Notes |
|---|---|---|
| Late corporate tax registration | AED 10,000 | One-off administrative penalty |
| Late filing of the CT return | AED 500 per month | First 12 months, then AED 1,000 per month |
| Late payment of corporate tax | 14% per annum | Charged monthly on the unsettled payable tax |
| Failure to keep required records | AED 10,000 | AED 20,000 for a repeat within 24 months — loan files count |
| Incorrect tax return | AED 500 | Waived if corrected before the filing deadline |
| Voluntary disclosure | 1% per month | On the tax difference, from the due date until disclosure |
One relief is worth ruling out explicitly: a QFZP cannot claim Small Business Relief — the two are mutually exclusive under Article 21. A small group treasury company with revenue under the threshold should compare both routes before electing, because the compliance load is very different.
📅 Small Business Relief closes on 31 December 2029 — and the election is annual
Small Business Relief is available only for tax periods ending on or before 31 December 2029. It is claimed by electing in the corporate tax return, and the election must be made for each eligible tax period separately — there is no rolling claim and it cannot be backdated once the return is filed. Miss the election for an eligible year and that year’s relief is lost. Separately, once revenue exceeds AED 3,000,000 in any tax period, relief ends for that period and all subsequent tax periods, even if revenue later falls back below the threshold. Governed by Ministerial Decision No. 73 of 2023. Check your SBR eligibility →
Key terms used in this guide
| Term | What it means |
|---|---|
| QFZP | Qualifying Free Zone Person — a free zone company meeting every condition for the 0% rate on Qualifying Income |
| Related Party | Article 35 — broadly 50% or more common ownership or control; the counterparty test for treasury income |
| Excluded Activity | Activity that can never produce Qualifying Income — here, finance and leasing other than to Related Parties |
| De minimis | Permitted non-qualifying revenue: the lower of 5% of total revenue or AED 5,000,000 |
| Net interest expenditure | Interest expense less interest income; the measure capped by the General Interest Deduction Limitation Rule |
| Adjusted EBITDA | Taxable income before net interest, depreciation and amortisation, adjusted as required for Article 30 |
| Cash pool leader | The entity operating a group cash pool; usually rewarded for coordination unless it bears real risk |
| Small Business Relief | Elective relief under MD 73/2023 for revenue up to AED 3,000,000, for tax periods ending on or before 31 December 2029; not available to a QFZP |
A UAE free zone treasury centre is a genuinely efficient structure — 0% on intra-group interest, no withholding tax on outbound payments, and an extensive treaty network behind it. But the 0% is a status you re-earn annually, and the two things that break it are both avoidable: financing someone outside the group, and pricing that nobody benchmarked. Our corporate tax filing service handles the QFZP assessment, the loan pricing file, the audit and the return together. Wider context: the UAE corporate tax guide for businesses.
Fastlane Tax Team
FTA-registered tax agents and Ministry of Economy registered auditors with 4,000+ corporate tax and VAT filings across the UAE mainland and 40+ free zones. Every guide is reviewed against current FTA regulations before publishing.
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