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Exploring the Impact of Corporate Tax Changes in Mainland Entities and Free Zones in the UAE
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Exploring the Impact of Corporate Tax Changes in Mainland Entities and Free Zones in the UAE

As the UAE continues to solidify its position as a global business hub, recent changes in corporate tax laws have sparked significant interest among investors and corporations alike. As per the new regulations, businesses operating in free zones will be treated differently than the ones in the mainland. Entities often look out for corporate tax advisory in Dubai before finalizing whether to operate in the UAE’s free zones or the mainland. With professional support, businesses can embrace the right track while adhering to the fresh tax regulations in the country.

An Overview of the Regulatory Framework in the UAE

In the UAE, free zones operate under distinct regulations and legal systems separate from those governing mainland entities. With over 40 multidisciplinary free zones across the country, Dubai continues to be a hotspot for global businesses. Each zone has its own regulatory authority. For instance, the DMCC (Dubai Multi Commodities Centre), JAFZA (Jebel Ali Free Zone), and Masdar City Free Zone in Abu Dhabi have historically offered enticing benefits like full profit repatriation and 100% foreign ownership.

Traditionally, free zones guaranteed zero personal and corporate income taxes for as long as 50 years, which significantly attracted investors. However, the landscape has evolved with the implementation of the UAE’s Federal Decree-Law No. 47 of 2022 on the Taxation of Corporations and Businesses. This led to the introduction of a 9% corporate tax, which became effective from June 1, 2023, although there were exemptions and considerations for businesses operating in free zones.

Mainland entities, on the other hand, are subject to the same rate of corporate tax of 9% on their taxable income exceeding Dh 375,000. They operate with strict restrictions, adhering to stringent reporting standards and can carry out businesses both internationally and domestically. Thanks to recent amendments to the Commercial Companies Law, these entities enjoy 100% ownership in some sectors that bridge the gap between free zones and mainland operations.

Tax Implications and Considerations

Under the new tax regime, free zone entities meeting specific criteria may still enjoy exemptions. According to Article 18 of the Corporate Tax Law, free zone entities in the UAE will be exempted from fulfilling certain conditions. These are referred to as Qualified free zone Persons (QFZPs). Here are the conditions to obtain the QFZP status.

  • Maintaining adequate substance in the country
  • Obtaining the qualifying income
  • The entity operating in the free zone shouldn’t have been elected to be subject to corporate tax
  • Adhering to the document requirements and transfer pricing rules
  • Satisfy any other conditions that the Minister in charge might prescribe

Qualified free zone Persons (QFZPs), adhering to regulatory requirements and maintaining a substantial presence within the UAE, can benefit from a 0% tax rate on Qualifying Income, with a 9% rate applied to other taxable income.

Adapting to the new regulatory landscape presents challenges for both free zone and mainland entities. It is imperative to ensure compliance with the intricate requirements and documentation to mitigate the risk of penalties and maintain operational efficiency.

With professional corporate tax advisory in Dubai, entities can make informed decisions when it comes to something as serious as taxation.

Avoid a AED 10,000 fine by Meeting UAE's Corporate Tax Deadlines. Contact us for Expert Tax Compliance Guidance and Protect your Business.
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Professional Tax Advisory Services in Dubai

While the new tax laws aim to harmonize regulations, they also present opportunities for entities to reassess their operational and tax structures. As MNCs explore these changes, strategic planning and compliance will continue to be the key to capitalize on emerging opportunities and mitigate risk strategically.

The IMC Group is a trusted team of professionals for complete corporate tax planning 2024. With experts available to guide you amidst the challenging corporate tax regime, you can comply with the prescribed norms.

Mainland entities will face the new corporate tax but with fewer operational restrictions than those imposed on free zone companies. They will also enjoy the corporate tax regime’s tax relief, allowing them to tap into benefits such as small business relief, business restructuring relief, and transfer within a qualifying group.

Adhering to new regulations might be challenging for both free zone and mainland entities, and it is crucial to navigate the complexities of the new tax law, ensuring compliance with the requirements and documentation to avoid penalties.

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Family Offices Surge in the Middle East, Bringing Fresh Opportunities
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Family Offices Surge in the Middle East, Bringing Fresh Opportunities

The Middle East is bracing up as a key player with highly esteemed family offices catering to UHNWIs (ultra-high-net-worth individuals). Leading players are set to infuse the economy of the UAE with a massive $500 billion investment in the next three years. This financial boost will dynamically boost the economic standing of the region, with family offices taking center stage in strategic wealth planning.

A recent study reveals a notable shift in the mindset of family office executives in the UAE. Currently, the focus has expanded beyond investments, unlike historical trends. Family offices in the Middle East are trying to establish a robust operational foundation. Thanks to the favourable regulatory environment in the UAE, family offices can carry out professional operations in the country, leveraging strategic advantages in the region.

Market Trends and Diversifying Portfolio

Wealthy families and individuals are turning to established single family office in Dubai to streamline their finances.

The demand for intergenerational wealth management has witnessed a significant surge in 2024. Families in the Middle East prefer hiring professional teams for successfully transitioning wealth, addressing taxation concerns, and optimizing inheritance. The present investment environment is defined by a wait-and-watch approach along with adequate caution. This demonstrates the need for strategic wealth preservation in the Middle East.

When it comes to innovative family office strategies, the investment landscape has witnessed a notable shift. Family offices currently prefer private credit and equity over public markets, eyeing more lucrative returns. Experts have noted a calculated and cautious approach from leading family offices. Some clients are ready to sacrifice the liquidity of their assets for better returns under uncertain market conditions.

The 3 Rs of Family Office Strategies - Rebuild, Retain, Regulate

The evolving sector of single family office is defined by 3 Rs: retain, and regulate. Top players in the industry are channelling their efforts towards recovering and retaining employees through innovative schemes and engaging with regulators proactively. The focus on transparency has been a priority, as experts recommend exercising caution against over-regulation that might jeopardise family offices from being established in the Middle East. This demonstrates the value of privacy and control.

Emerging Trends and Futuristic Investments

The UAE continues to attract wealthy families globally due to its favorable tax environment. Other factors contributing to this trend include sophisticated lifestyle amenities, a robust financial services sector, and the strategic location of the country. However, experts believe that family offices need to tactically balance growth, family values, and preserving wealth. Technology has a key role to play in this regard since family offices are embracing governance and institutionalization. Now, the focus has shifted significantly to cybersecurity measures and data security.

The report also points out a transformative shift in gender involvement in family businesses. In the Middle East, the role of women in the wealth management of families is being recognized formally. A large number of women have achieved leadership positions in this regard. This trend demonstrates a change in attitude, offering both genders equal opportunities for sponsorship and mentoring with updated regulations. According to the latest norms, gender diversity has been mandated on company boards.

As the UHNW population increases in the Middle East, the family office sector is witnessing substantial changes. From succession planning to diversified investment strategies and ESG considerations, the evolving landscape promises opportunities and challenges alike.

The IMC Group continues to be one of the established players in the Middle East. This consulting firm offers specialized and customized services to address the unique needs of each family office. Whether you need professional assistance in succession planning or personal holding company formation and management, the experts offer tailored solutions to individuals and families.

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UAE Corporate Tax Landscape in 2024: Why Branch Licenses Matter?
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UAE Corporate Tax Landscape in 2024: Why Branch Licenses Matter?

The new year 2024 marks a significant transition for businesses adhering to the January to December financial year in the United Arab Emirates (UAE). With the advent of corporate tax, even though the corporate tax returns are slated for submission in September 2025, it is prudent to conduct a preliminary review of key considerations. Successful businesses work closely with reputed corporate tax consultants in Dubai to ensure adherence.

Corporate Tax Registration Process

At the outset, businesses in the UAE need to get their entities registered to establish their legal existence. Thanks to the streamlined process of online registration, it takes little time to get your business registered with the regulatory authorities. Once recognized, businesses in the UAE are recognized as registered taxpayers. The fast process also allows ample time for authorities to review applications and provide feedback.

The Emaratax technology helps corporate tax registration align with the information submitted earlier for VAT. An early application helps in detecting potential loopholes in VAT registration. Fixing these information loopholes is crucial before businesses smoothly complete the corporate tax registration process.

Avoid a AED 10,000 fine by Meeting UAE's Corporate Tax Deadlines. Contact us for Expert Tax Compliance Guidance and Protect your Business.
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Knowing License Categories

For businesses operating in the UAE, the different categories of licenses present surprises since they are habituated to working under established category for years. Notably, branches of a UAE company, especially those spanning multiple emirates, are viewed as extensions of the main head office license and do not require separate registration. Obtaining additional licenses merely by appending ‘branch’ to the name may risk categorizing these licenses as separate entities, subjecting them to distinct regulatory requirements.

Businesses operating under multiple sole establishments or civil company licenses across emirates face similar challenges in the emirates. This challenge becomes particularly pressing for companies when they are coupled with separate VAT registrations. This explains why it’s imperative to identify the license category accurately. Businesses aiming to qualify for small business relief (SBR), particularly regarding financial resources, unified management, and shared bank accounts should focus on this crucial process.

Planning to Close the Company in 2024? Clarifications Await

Often, business owners seem to be reluctant to register for corporate tax, particularly when they consider liquidating their company in 2024. It is crucial to dispel the misconception that liquidating a company absolves it from tax obligations. Businesses need to register their commercial entity, submit a corporate tax return for the truncated financial year, and then commence the de-registration process. Any delays in compliance may attract penalties, including those on legal representatives.

Different tax authorities in the UAE need to coordinate on the matter. Therefore, obtaining corporate tax clearance might be a prerequisite for approving company liquidation, prioritizing the importance of timely compliance.

Tax Benefits for Free Zone Companies

Recent developments have granted commodity traders operating from non-designated zones a preferential tax rate of 0% on income generated on qualifying commodity trading. However, companies established in ‘designated zones’ continue to face complexities when it comes to their eligibility for preferential tax rates on direct/third-port shipments and ‘high-sea sales.’

Considering the ongoing debate, it’s important to determine the eligibility of your business based on its location and goods. Relying solely on public consultation documents may not be the logical approach. Free zone companies engaged in various qualifying activities must understand the scopes of inclusions and exclusions regarding their qualifying activities.

Adequate Substance: Ensuring Tax Benefits

For companies eligible for free zone tax benefits, maintaining adequate substance in the respective free zone is imperative. The restructuring required to meet substance requirements could be substantial. With the new era of tax regulations posing considerable challenges, businesses must be meticulous while planning. Inadequate planning or inexperience can lead to missed opportunities or penalties.

The IMC Group continues to be one of the trusted corporate tax consultants in Dubai. Businesses can reach out to these professionals for sound advice and remain on the right track amidst the evolving tax regulatory regime.

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All You Need to Know About the UAE Corporate Tax Compliance in 2024
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All You Need to Know About the UAE Corporate Tax Compliance in 2024

As the UAE braces up for a new era of corporate taxation in 2024, businesses operating in the country should equip themselves with the necessary procedures and knowledge to comply with the upcoming corporate income tax regulations. Successful enterprises and organizations seek corporate tax advisory in Dubai from established partners for adherence to the new policies. Let’s take a look at new corporate tax compliance requirements in the UAE in 2024 in this edition.

Register for Corporate Tax

In the UAE, the implementation of corporate tax is set to commence from the first financial year starting on or after 1st June 2023. All companies, including the ones operating in free zones, should register for corporate income tax, regardless of their existing VAT registrations.

The Emara Tax portal on the Federal Tax Authority’s (FTA) website facilitates this process, offering a seamless registration experience. The registration process is simple, and it won’t take more than 30 minutes to complete the process. A comprehensive video guide is available on the website for FTA to assist businesses. Even companies that have already registered for VAT and Excise Tax can complete their corporate tax registration through the portal.

Businesses that aren’t currently registered for Excise Tax or VAT first need to create a new user profile on Emara Tax. Next, they need to choose corporate tax registration and complete the application process. For your application to be successful, it’s imperative to furnish accurate information and update the supporting documents.

Necessary Documents for Corporate Tax Registration

The necessary documents to complete corporate tax registration of Legal Persons include:

  • An Emirates ID of the authorized signatory
  • Proof of authorization (POA/MOA) for the signatory
  • Trade license or business license
  • Passport

The FTA requires businesses to provide accurate percentages of shareholding that correspond to the actual holdings of the owners and align the date or incorporation with the commencement date of the company as per the MOA. Entities must also provide the tax period. Businesses willing to form a Corporate Tax Group have to register individually. They have to obtain a Tax Registration Number and apply to establish a Corporate Tax Group at a later date, according to FTA’s guidelines.

Maintaining proper accounting records

The corporate tax law in the UAE makes it mandatory for businesses to maintain specific accounting records. Companies must seek assistance from professional teams for compliant bookkeeping and accounting. Reputed tax consultants in Dubai can provide you with the necessary assistance and advice in this regard.

File a Corporate Tax Submission

This is a crucial step that businesses must complete once the first taxable period comes to an end. Even if your business qualifies for tax exemption, you need to file a tax submission with the FTA.
Avoid a AED 10,000 fine by Meeting UAE's Corporate Tax Deadlines. Contact us for Expert Tax Compliance Guidance and Protect your Business.
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Corporate Tax Rates Businesses Musk Know

The corporate tax rates in the UAE are based on annual net profits.

  • Tier 1: For companies with annual net profits up to AED 375,000, no tax has to be paid
  • Tier 2: For companies with profits of more than AED 375,000, a 9% tax rate has to be paid
  • Tier 3: Large MNCs need to pay tax at a different rate as per OECD Pillar Two guidelines

Corporate Tax for Free Zone Companies

Contrary to common belief, free zone businesses aren’t completely exempted from corporate income tax. However, Qualifying Free Zone Persons may not have to pay tax once they fulfill criteria like making qualifying income, maintaining adequate substance, and adhering to the requirements of transfer pricing.

Relief for Small Businesses

If the revenue earned by your business is below AED 3 million per tax period, you can qualify for exemption from corporate income tax.
Calculating Taxable Profit
Taxable profit is calculated by deducting expenses related to business from revenue. Special rules apply for expenses such as interest, salaries, foreign branches, and entertainment.
Differentiating VAT and Corporate Tax
Businesses in the UAE collect VAT from customers while selling products or services. On the other hand, they pay corporate income tax on their annual net profits. Therefore, VAT-registered businesses should also register to pay income tax.
What are the administrative penalties?

Businesses in the UAE failing to adhere to corporate tax regulations may face administrative penalties ranging from AED 500 to AED 20,000 from 1st August 2023.

The FTA has launched an extensive awareness campaign to help the business community understanding the implications of corporate income tax. This educational initiative includes several workshops, sessions, and webinars to provide in-depth insights into the Corporate Tax Law. This will help foster a culture of self-compliance among businesses. Both taxpayers and the broader business community will benefit from this programme.

Notably, virtual workshops conducted in Arabic and English on ‘Corporate Tax Registration’ cover critical aspects, including the creation of a new user profile on the Emara Tax portal, necessary documentation, application procedures, and obtaining a UAE Corporate Tax Registration Number.

As a leading company providing corporate tax advisory in Dubai, the IMC Group continues to assist businesses comply with tax norms. With professional guidance, businesses can make conscious decisions to ensure tax compliance.

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A Comprehensive Guide to Purchase Off-Plan Property in Dubai
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A Comprehensive Guide to Purchase Off-Plan Property in Dubai

Planning to invest in off-plan properties in Dubai? As a forward-thinking investor, you would like to secure your investment. Successful investors habitually seek due diligence services in Dubai to ensure they remain on track with legalities. At the same time, it’s imperative to assess your ROI and secure your property at the lowest cost, besides benefiting from a favourable payment plan.

However, capitalizing on such lucrative opportunities calls for a deep understanding of the country’s regulatory framework regarding these dealings.

In this edition, we are going to explore the key guidelines mentioned in Dubai Law No. 13/2008 regarding Real Estate Registers. This will present you with a comprehensive roadmap for acquiring off-plan properties successfully in Dubai.

Key Aspects to Focus on While Purchasing Off-Plan Property

In the first place, you must be aware of the norms governing foreign ownership in freehold areas. The process starts with exploring the designated areas for foreign ownership. Under the existing laws in the UAE, these are referred to as freehold properties. As a foreign investor, you need to select a property located in a freehold area to legally secure your investment.

1. Registration and Compliance

In Dubai, it’s essential to register all off-plan property transactions in the Interim Real Estate Register. Failure to comply within the 60-day timeframe may jeopardize the validity of the sale or property transfer.

2. Acquiring the Land

Both primary and subordinate developers need to obtain the necessary land and approvals from competent authorities in Dubai before initiating or selling off-plan units. The property register must record the development.

3. Legal Due Diligence

Legal due diligence buying property in Dubai involves a verification process with the government authorities like the Real Estate Regulatory Agency or the Dubai Land Department. During this step, the property is registered in the presence of an escrow account while the necessary permits are obtained.

4. Transparent Application Processes

Property buyers need to follow the legal procedures meticulously as they apply to register an interim real estate unit. They should furnish the necessary documents and information as requested by the Land Department of Dubai.

5. Protecting the Rights of Buyers

Legal actions on registered off-plan units are facilitated, allowing for legal transfers, mortgages, or other actions under the law. Developers are strictly prohibited from imposing additional fees for selling or reselling completed or off-plan units. Any administrative expenses must obtain prior approval from the Land Department.

6. Completion and Registration Protocols

Developers are mandated to get the finished project registered in the property register. This ensures the seamless transfer of off-plan units into the name of the buyer as per the contractual requirements.
7. Stringent Contract Formalities
Brokers and developers should refrain from engaging in informal contracts without obtaining prior approval from competent authorities to uphold the integrity of off-plan property transactions. Under the regulatory framework, such contracts will be considered invalid.
8. In Cases of Violation
Article 11 of Dubai Law No. 13/2008 explains that developers should inform the Department of violations, if any. If the issue remains unresolved in the next 30 days, the Department will issue an official document verifying the completion percentage and agreement of the developer. Developers can request public auctions, maintain the contract, or cancel them based on the rates of completion. Full refunds will be necessary in case the project isn’t initiated or cancelled.
Seeking professional support for legal due diligence
For prospective investors, it’s imperative to understand the norms under Dubai Law No. 13/2008. The IMC Group continues to be one of the leading partners for developers offering legal due diligence services. With professional support on the side, developers can proceed with their ambitious investments with confidence.

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Effortless Corporate Tax Registration: Your Ultimate Guide to a Smooth Process!
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Effortless Corporate Tax Registration: Your Ultimate Guide to a Smooth Process!

Please consider us your allies, ensuring a smooth and compliant corporate tax journey. At IMC, we are committed to delivering indispensable insights, ensuring your readiness for the approaching fiscal year with confidence and compliance.

Essentials for Corporate Tax Registration:

Comprehending the Corporate Tax Law holds great importance, and we’re dedicated to assisting you in smoothly navigating this process. Here, we outline essential vital points to consider:
  1. Enrollment and Withdrawal: It’s highly recommended that all eligible taxable person register for Corporate Tax through the Federal Tax Authority (FTA) without delay. Non-residents earning income from the state have specific factors to note. Timely submission of a Tax Deregistration application is crucial to evade penalties.
  2. Financial Reports and Accounting Approaches: The significance of financial statements in assessing taxable income is paramount. Your choice between a Cash Basis or an Accrual Basis of Accounting depends on your revenue. Adherence to International Financial Reporting Standards (IFRS) and meticulous record-keeping are vital.
  3. Submitting Applications and Making Choices: Businesses aiming to capitalize on Corporate Tax Law provisions might need to apply or make specific elections. Determining when FTA approval is necessary for exemptions, joining tax groups, and specific relief applications is essential.
  4. Filing Taxes and Settling Payments: Corporate Tax functions through a self-assessment system. To prevent penalties, it’s crucial to submit tax returns and payments promptly, within nine months after the relevant tax period’s end. In the case of tax groups, the parent company takes charge of filing.

Key Dates to Mark in Your Calendar: (Registration Process Already started)

End of Financial Year Initial Reporting Period Date of Registration Deadline for Submitting Initial CT Return and Payment Deadline Initial Submission of Transfer Pricing Disclosure Form
Dec-23 Jan 2024 to Dec 2024 Registration Process Already started 30th Sep 2025 30th Sep 2025
Jun-23 Jul 2023 to Jun 2024 Registration Process Already started 31st Mar 2025 31st Mar 2025

Get Started on the Path to Smooth Tax Registration

Book Your Call Now

Required Documents for UAE Tax Registration

In the UAE, corporate tax applies to businesses with taxable income. The corporate tax rate stands at 0% for earnings up to AED 375,000 and 9% for earnings surpassing AED 375,000.

In readiness for corporate tax registration, individuals liable for taxation require the following documents:

  • Photocopy of a valid Trade License
  • The license-owning owner/partners must provide copies of their valid Passport and Emirates IDs
  • Power of Attorney (POA) / Memorandum of Association (MOA)
  • Contact information of the relevant individual and the company
  • Report on the annual financial audit

Reasons to Consider Why IMC?

Navigating the complexities of corporate tax can be daunting, which is where the IMC team excels. Armed with in-depth knowledge of the latest UAE Corporate Tax regulations, we will simplify the process for you.

Leverage our team’s extensive experience to ensure precise and punctual compliance with Corporate Tax Law. Entrust us with the finer intricacies while you focus on your core business operations.

Navigating the complex landscape of corporate tax registration in the UAE can be challenging. However, with our IMC expertise in taxation and regulatory compliance, we empower businesses to navigate these complexities confidently. Our commitment to you is to provide the necessary knowledge to ensure seamless integration into the UAE’s tax framework.

For any queries or further clarification, reach out without hesitation. Please consider us your allies, ensuring a smooth and compliant corporate tax journey.

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Strategic Insights for Incorporating Your Business in the UAE
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Strategic Insights for Incorporating Your Business in the UAE

The UAE continues to stand out as a strategic business hub for global businesses of all sizes. Its supportive business environment and tactical location make it a preferred destination for organizations seeking scalability and growth. When you explore viable ways of a company formation in Dubai, you need to choose between the mainland and the free zone. However, your decision largely depends on several factors, including your target market, the nature of your business, and your goals. These factors often sum up to pose a challenge so overwhelming, that forward-thinking businesses count on professionals to remain on the right track.

As you brace up to incorporate your business in the UAE, check out these key insights that should help you make informed decisions and lead you to success.

Choosing the Right Setup: Free Zone vs. Mainland

In the first place, global businesses striving to expand in the UAE should choose between the mainland and a free zone. This choice should align with your business objectives. For instance, if you are running an export-oriented business and need foreign talent, opting for a free zone might be a strategic decision. This way, you can benefit from waived corporate tax, 100% foreign ownership, easy financing, and a more favorable regulatory environment.

On the other hand, if you are targeting the UAE market directly, particularly sectors like real estate, retail, hospitality, construction, and healthcare, setting up your business on the mainland will be a logical move.

Crafting Effective Strategies for Market Entry

Explore some of the highly effective market entry strategies when you eye a business venture in the UAE.

1. Market Analysis with Research

As a prerequisite of entering the market in the UAE, carry out thorough research to comprehensively understand your target audience, the local business environment, regulatory norms, and overall competition. Once you identify your opportunities along with market gaps, narrow down upon the ones aligned with your goals.

2. Networking and Building Partnerships

Foster strong bonds with local suppliers, distributors, partners, and industry networks. These connections go a long way in offering valuable insights and help in establishing your visible presence in the Middle East. Nurturing fruitful partnerships goes a long way in facilitating your market entry.

3. Regulatory Compliance

While expanding your business overseas, getting entangled in legal hassles is the last thing to expect. Staying informed on legal and regulatory norms is imperative, and you may consult professionals on this matter. Make sure to obtain the necessary permits and licenses and reach out to legal consultants if you aren’t too confident about your approach.

Choosing the Right Legal Structure

A pivotal domain of incorporating your business in the UAE involves selecting the appropriate legal structure for your company. The most common options in the UAE include:

  • Free Zone Company
  • Limited Liability Companies (LLCs)
  • Branch or Representative Office
  • Sole Proprietorship and Civil Company
  • Stock Company

Scaling Your Business Effectively

A methodical approach, as defined below, will help your business scale effectively.

1. Strategic Planning

As a part of your tactical planning process, develop a clear growth strategy, aligning it with the goals of your target market and business. It’s imperative to identify viable opportunities for expansion and invest in branding and marketing. Try to adapt your services and products to fulfill the evolving interests of customers.

2. Acquiring and Developing Talent

There’s no denying that human resources continue to be the greatest asset for a booming business. Look out for skilled professionals, and recruit and retain them. Make sure that they are well-acquainted with the local market and invest in programs for training and developing employees. With advanced competencies, they can strengthen your business with a competitive edge.

3. Broaden your market reach

The secret to broadening your reach in the market lies in establishing strategic collaborations with local suppliers, companies, and distributors. With partnerships and joint ventures, you can pacify your growth trajectory, leveraging existing networks and their proficiency.

The process of business setup in Dubai involves several strategic decisions. Forward-thinking business leaders seek professional support from our consultants, who recommend effective market entry strategies. The IMC Group continues to be your reliable partner for establishing your business in the UAE. The experience of our specialists can position your business to embrace success in the long term amidst the dynamic business environment in the UAE.

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Succession and Estate Planning Unveiled: Key Trends and Challenges in the Middle East
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Succession and Estate Planning Unveiled: Key Trends and Challenges in the Middle East

Succession and estate planning in the Middle East is a crucial domain that has drawn the attention of various professional fronts. It’s imperative to understand the key trends and challenges of the Sharia-compliant estate structures and gain insights into the financial future of the area. From the challenges of multiple jurisdictions to the impact of technology, this edition of our newsletter offers a complete idea of the evolving dynamics in wealth transition. With these valuable insights into evolving strategies that individuals and families are adopting, you can secure your future in the Middle East.

Challenges in Sharia-Compliant Estate Planning

Sharia-compliant estate planning is not a novel concept in the Middle East, but it presents unique challenges. Some of these include:
  • It’s challenging to address the evolving dynamics of local GCC assets within Sharia-compliant estate plans. There has been a visible shift toward increased inclusion and significance in comparison to non-GCC assets
  • Another hurdle is to explore the uncharted territories of domestic estate planning solutions like the UAE federal trust regime and common law private foundations
  • Managing the web of multiple (non-GCC) jurisdictions remains a challenge, which is influenced by the demographic location of family businesses and different nationalities or tax residencies of family members
  • The absence of standardization and harmonization in legal frameworks governing Sharia-compliant estate planning across different GCC countries continues to be a challenge. For affluent families, this lack of uniformity poses significant challenges to encompass all their assets within the GCC

Emerging Trends Shaping the Future of Succession and Estate Planning

In this section, we have discussed the emerging trends that will shape the future of succession and estate planning in the Middle East.

1. Domestic Structuring

Over the years, international structuring has been a viable option. However, the rise of local alternatives like the UAE Foundation, is gaining prominence. New trends reveal that clients largely favor locally-based advisors. These domestic structuring options provide a pragmatic response to rising pressure and costs associated with the adherence to global tax norms.

2. Growing Wealth in the GCC

As the GCC cements its position as one of the wealthiest regions globally, the demand for estate planning services keeps rising. High oil prices and booming economies in the Middle East are the key factors spearheading the affluence of the region. This explains why families are looking for comprehensive solutions for the preservation and succession of their wealth.

3. Increased Awareness of Estate Planning

A significant shift has been noted in the awareness for protecting assets and intergenerational planning among families and high-net-worth individuals in the GCC. This trend reveals that the next generation is likely to take a proactive stance in financial planning. They will recognize the impact of the dispute on their family assets.

4. ESG and Impact Investing

The rise of ESG (Environmental, Social, and Governance) considerations and impact investing is yet another important trend to check out. This trend is particularly visible among younger members of the family. Within family offices, the focus has substantially shifted to long-term sustainability and ESG. This has fuelled a growing interest in digital assets and private banks.

5. Family Offices Becoming Professional

Family offices are undergoing a transformation, and they are becoming increasingly sophisticated while dealing with complexities and managing alternative asset classes. They are bracing up to fulfill more stringent regulatory requirements. The asset management process is becoming increasingly complex, which has fuelled this professionalism. This calls for increased transparency and advanced investment strategies.

6. Technology in Estate Planning

Across the GCC, the role of technology in estate planning is going to be vital in the Middle East. From the virtual execution of DIFC wills to the digitization of registration and operations for UAE foundations and family offices, technology goes a long way in enhancing efficiency. Family offices are readily embracing artificial intelligence, machine learning, and advanced data analytics to streamline their decisions.

7. Affordability of UAE Foundation

Establishing a UAE Foundation involves relatively lower costs. This has gone a long way in democratizing access to asset strutting and protection. The cost of registering a will with the Abu Dhabi Judicial Department at approximately USD 260. This implies that now, a broader segment of the population can secure their assets.

8. Multiple Structures for Estate Planning

Considering the uncertainty in the current business environment, the demand for multiple estate planning structures is on the rise. A recent trend reveals that in the GCC, wealthy families are exploring diversified approaches to reduce the risk associated with owning assets in more than one country.

9. Professional Estate Planning Advisors

A notable trend in succession and estate planning in the Middle East reveals that an increasing number of families are seeking professional advice from established companies for estate planning. These families in the GCC have realized the importance of engaging estate planning advisors for tailoring plans, which align with individual needs to secure the interests of their beneficiaries.
At the IMC Group, we understand the challenges and new trends in succession and estate planning in the Middle East. Our dedicated team of professionals operating both in the Abu Dhabi Global Market and DIFC offers a comprehensive range of services to private and corporate clients. We remain committed to our clients with highly customized succession and estate planning advice.

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A Guide to Understanding Corporate Taxation in UAE Free Zones
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A Guide to Understanding Corporate Taxation in UAE Free Zones

The UAE continues to be a preferred hub for entrepreneurs and investors seeking global opportunities to expand. While the country might be synonymous with a tax-free environment, entrepreneurs should be aware of recent changes in its corporate tax regime. With the recent implementation of the Federal Decree-Law No. 47/2022 on the Taxation of Corporations and Businesses, the tax-free environment has witnessed a change in paradigm. Effective from 1st June 2023, this new corporate tax regime in the UAE has been drawing the attention of investors. Forward-thinking organizations can reach out to established professionals for corporate tax advisory in Dubai to ensure compliance and manage their tax obligations.

Considering the gravity of the new corporate tax regime on your organization, it pays to understand the impact of taxation in the Free Zone areas in the UAE. In this comprehensive guide, you will get a clear understanding of the classifications, regulations, and benefits associated with Corporate Tax in the UAE Free Zones.

What Do Free Zones Mean For Your Business In The UAE?

Free zone areas have emerged as strategic business hubs in the UAE. These zones offer a wide array of incentives to businesses such as exemption from import and export duties, 100% foreign ownership, and several tax advantages. Businesses need to understand the clauses of Corporate Tax regulations to ensure compliance and capitalize on the advantages.

Free Zone Persons

For understanding tax obligations in the Free Zones in the UAE, it’s imperative to distinguish between Juridical Persons and Natural Persons. Natural Persons, operating independently, include sole establishments, freelancers, and civil companies. Although these individuals may carry out their business from a Free Zone, the UAE Corporate tax laws don’t recognize them as Free Zone Persons. Juridical Persons, on the other hand, include corporate entities like LLCs. They can attain the status of Free Zone Persons only when they are incorporated into these Free Zones.

What Are The Corporate Tax Rates For Free Zone Companies?

Based on their classification, corporate tax rates may vary for Free Zone companies.

  • QFZP (Qualifying Free Zone Person): Eligible for a 0% tax rate on qualifying income.
  • NQFZP (Non-Qualifying Free Zone Person): Not meeting specific conditions, leading to different tax implications.
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Criteria for Qualifying Free Zone Person (QFZP)

  • Fulfill Adequate Substance in the UAE such as having sufficient assets, being involved in activities to generate income, having mandatory operating expenses and qualified employees
  • As explained in Cabinet Decision No. 55 of 2023, the entity must get “Qualifying Income”
  • Avoiding the applicability of the 9% tax rate
  • Adherence with Arm’s Length & Transfer Pricing Rules
  • Fulfilling other conditions outlined in the Cabinet Decision No. 139 of 2023

Taxation for Three Types of Business Activities in Free Zones

Business activities in Free Zones fall into three categories: qualifying activities, excluded activities, and other activities.

  • Qualifying activities: Approved activities are defined as per the parameters of Cabinet Decision No. 139 of 2023. Companies actively involved in these operations may be eligible for tax incentives or exemptions.
  • Excluded activities: Restricted activities include a list of operations that do not align with the criteria for tax benefits or exemptions mentioned under Approved activities. For businesses, it’s crucial to identify whether or not their activities come under this category.
  • Other activities: These include activities that aren’t mentioned explicitly under the Qualifying or Excluded Activities lists. For these activities, the tax implications are decided after considering their nature and respective tax regulations.

Qualifying Income Categories

The structure of Qualifying Income is decided on the basis of the transactional nature and parties involved. These include:
  • Transactions with Other Free Zone Persons, including qualifying income that covers all the transactions excluding the ones originating from Excluded Activities
  • Transactions with Non-Free Zone Persons, where qualifying income includes revenue generated exclusively from Qualifying Activities, where Excluded Activities is considered ineligible
  • All Other Transactions, where Qualifying Income may include extra revenue, and has to meet de minimis requirements

Tax on Accountable Income

  • Tax on Accountable Establishment Income: Income attributed to Domestic or Foreign Permanent Establishments of Free Zone Persons is calculated at a 9% tax rate.
  • Tax on Accountable Income to Establishments and Immovable Property: Tax rates on accountable income may vary on the basis of the nature of transactions and parties involved. It is crucial for businesses to understand these aspects to comply with tax regulations in Free Zones.
For corporates, it’s natural to wonder how to calculate the payable corporate tax in the UAE? For businesses, understanding Corporate Taxation in UAE Free Zones is crucial for seamless financial planning and adherence to norms. The IMC Group is your trusted partner for corporate tax advisory. With professional support from our expert team, you can embrace the new corporate tax regime with confidence.

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What Factors Are Vital for Ensuring ESR Report Compliance upon Submission
  • NEWSLETTER,U.A.E

What Factors Are Vital for Ensuring ESR Report Compliance upon Submission?

This is to inform you that the Economic Substance Regulation (ESR) requires reporting by December 31, 2023, for the Financial Year ending December 31, 2022.

The Economic Substance Regulations (ESR) in the United Arab Emirates (UAE) require certain legal entities in domestic and free zones to conduct one or more of nine relevant activities (RA) (referred to as “licensees”) to comply with annual filing obligations.

Licensees earning income and meeting under the exempted licensee criteria (for instance, if a licensee operates as a branch of a foreign entity and its income is taxed in a foreign jurisdiction) must submit a notification but are exempt from filing a report.

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There are other exemptions. The Ministry of Finance has recently released updated instructions in Ministerial Decision No. 100 of 2020, which can help firms determine whether they conduct a relevant activity and are exempted licensees.

Key Factors to Consider

Relevant Activities (RA): As per the UAE Ministry of Finance’s ESR Regulation, the responsibility for submitting an ESR Notification and ESR Report lies with Licensees involved in any pertinent activities and generating specified relevant income outlined in the regulation.

Reminder about the Deadline: The deadline to submit the ESR Report is approaching. We strongly encourage you to act promptly, to guarantee compliance with the regulatory obligations.

An entity must submit a notification within six months from the end of the fiscal year (FY) stating its engagement in RA, regardless of whether the licensee is exempt from the ESR or generates income from RA.

A report outlining specific business details should be filed within 12 months after the conclusion of the Fiscal Year, solely if income was derived during the period from RA and the licensee was not exempt from the ESR.

Consequences of Non-Compliance: Not submitting the ESR report by the specified deadline may lead to an administrative penalty of AED 50,000. It’s essential to adhere to the resolution’s provisions by submitting the report and any pertinent information or documentation to avoid these penalties. Furthermore, failure to comply with the Economic Substance regime for the year ending 31 December 2022 will have severe results, such as suspension or cancellation of your business license.

Suggested Steps for Your Business

ESR Evaluation: We advise all Licensees to undertake a thorough ESR assessment, irrespective of involvement in pertinent activities, and, if applicable, to submit an ESR notification and report via the MoF portal.

Accountability for Pertinent Activities: Licensees involved in relevant activities and generating relevant income are obligated to file the ESR Notification and ESR Report. They will be answerable to their respective regulatory authorities.

Key ESR Factors to Consider before the end of the Financial Year

All legal entities should address the following ESR matters and act, where applicable, before the end of the fiscal year:
  • The entity needs to evaluate if it engaged in and earned income from any of the nine RAs within the period. This assessment is crucial as it determines the entity's specific ESR compliance needs for the fiscal year
  • Entities that have generated income from RA during the fiscal year should assess their adherence to the relevant ESR evaluations, namely the directed and managed test, core revenue generating activities (CIGA) test, and adequate examination
  • After the review, entities should promptly undertake all essential measures before the fiscal year's conclusion to rectify any potential non-compliant areas (i.e., ensuring adherence to all relevant ESR tests)
  • Regarding the CIGA test, entities must showcase control and supervision over any outsourced arrangements during the fiscal year. This can be illustrated, for instance, through contractual agreements or correspondence
  • Given the FTA ESR audits, Licensees should gather pertinent supporting documents regarding their ESR compliance obligations and maintain them on file. Should they be chosen for an audit, Licensees have a brief timeframe of 5 working days to furnish the FTA with all requested documentation (i.e., demonstrating compliance with the ESR tests)
The guidance mentioned above (not exhaustive) is to offer entities a chance to initiate any required actions for ESR compliance before it becomes too late.
How Can IMC Be Your Trusted Ally?

Navigating the complexities of compliance with regulatory bodies such as the Federal Tax Authority (FTA) and the Ministry of Finance (MOF) can be challenging. At IMC, we understand the importance of staying in good standing with these authorities. That’s why we’re here to assist you in conducting a thorough ESR assessment and ensuring clear communication of your status to the regulatory authority.

By partnering with us and addressing these requirements promptly, you can avoid the stress of potential conflicts and significant penalties. Remember, we’re just a call or an email away for any additional guidance or questions you might have. Let’s tackle these challenges together, with ease and confidence.

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