What are the UAE Corporate Tax record-keeping requirements for 2026?

Under Federal Decree-Law No. 47 and Article 52 of the Tax Procedures Law, taxable persons must maintain records for 7 years. Arakan Protocol ensures these records remain in-situ within the UAE digital perimeter to satisfy data residency mandates.

How does Pillar Two affect multinational groups in the UAE?

Pillar Two introduces a 15% global minimum tax for MNE groups with revenues exceeding EUR 750 million. Arakan provides automated GloBE substantiation and jurisdictional nexus mapping to manage top-up tax liabilities.

What is the 0% Qualifying Free Zone Person (QFZP) status?

A QFZP is a Free Zone entity that maintains adequate substance in the UAE and derives Qualifying Income. Failure to demonstrate Core Income Generating Activities (CIGA) can result in a retroactive 9% tax liability.

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Detailed Analysis of Qualifying Income for Free Zone Persons

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Steps to Determine Qualifying Income for Free Zone Persons

Identify Entity Status

Confirm if the entity is a **Qualifying Free Zone Person**, as the rules for **Qualifying Income** apply only to such entities.

Assess Income Source (Internal FZ)

Determine if income is derived from transactions with other **Free Zone Persons**. If so, verify it's not from **Excluded Activities** and the counterparty is the **Beneficial Recipient**.

Assess Income Source (External Non-FZ)

Determine if income is derived from transactions with **Non-Free Zone Persons**. If so, verify it's from **Qualifying Activities** and not **Excluded Activities**.

Evaluate De Minimis

For any other income not covered by the above categories, assess if the **de minimis** requirements are satisfied. Ensure proper adjustments for excluded revenues (e.g., certain immovable property or PE income) are made in the calculation.

Check General Exclusions

Ensure the income is not attributable to a **Domestic Permanent Establishment**, a **Foreign Permanent Establishment**, or to the ownership/exploitation of immovable property as per the specific provisions of the **Corporate Tax Law**.

Scope and General Conditions for Qualifying Income

Qualifying Income provisions apply exclusively to Qualifying Free Zone Persons. This income must not be attributed to a Domestic Permanent Establishment or a Foreign Permanent Establishment, nor to the ownership or exploitation of immovable property as detailed in other specific articles.

▶Provisions apply to Qualifying Free Zone Persons.
▶Income must not be attributable to a Domestic Permanent Establishment.
▶Income must not be attributable to a Foreign Permanent Establishment.
▶Income must not be attributable to the ownership or exploitation of immovable property (as per Article 6 of CD55).

Qualifying Income: Transactions with Other Free Zone Persons

Income generated from transactions between Free Zone Persons is considered Qualifying Income, unless it originates from Excluded Activities. A key condition is that the transacting Free Zone Person must be the Beneficial Recipient of the goods or services.

▶Income derived from transactions with other Free Zone Persons.
▶Income must not be derived from Excluded Activities.
▶The other Free Zone Person must be the Beneficial Recipient of the relevant services or Goods.

Qualifying Income: Transactions with Non-Free Zone Persons

Income obtained from transactions with a Non-Free Zone Person qualifies for preferential tax treatment only if it stems from Qualifying Activities. Furthermore, these Qualifying Activities must not fall under the definition of Excluded Activities.

▶Income derived from transactions with a Non-Free Zone Person (domestic or foreign).
▶Transactions must pertain to Qualifying Activities.
▶Activities must not be Excluded Activities.

Qualifying Income: De Minimis Requirement

Any income not explicitly classified under direct Free Zone Person transactions or Qualifying Activities with a Non-Free Zone Person may still be considered Qualifying Income. This is contingent upon the Qualifying Free Zone Person satisfying the specific de minimis requirements outlined in Article 4 of Cabinet Decision No. 55 of 2023.

▶Applies to 'any other income'.
▶The Qualifying Free Zone Person must satisfy the de minimis requirements under Article 4 of Cabinet Decision No. 55 of 2023.

Exclusions for De Minimis Revenue Calculation

Specific revenue types are excluded from the calculation of non-qualifying and total revenue for the de minimis test. These adjustments ensure that revenues from certain immovable property transactions or permanent establishments do not distort the Qualifying Free Zone Person's eligibility.

▶Revenue attributable to immovable property located in a Free Zone derived from transactions with Non-Free Zone Persons in respect of Commercial Property.
▶Revenue attributable to immovable property located in a Free Zone derived from transactions with any Person in respect of immovable property that is not Commercial Property.
▶Revenue attributable to a Domestic Permanent Establishment.
▶Revenue attributable to a Foreign Permanent Establishment.

Key Definitions

Understanding key definitions is crucial for accurate application of Qualifying Income rules for Qualifying Free Zone Persons. These terms delineate specific activities, entities, and property types relevant to corporate tax obligations.

▶Excluded Activities: Any activities determined by a ministerial decision, conducted by a Qualifying Free Zone Person, from which non-Qualifying Income is derived.
▶Non-Free Zone Person: Any Person who is not a Free Zone Person.
▶Commercial Property: Immovable property or part thereof used exclusively for a Business or Business Activity, and not used as a place of residence or accommodation (e.g., hotels, serviced apartments).
▶Corporate Tax Law: Federal Decree-Law No. 47 of 2022 on the Taxation of Corporations and Businesses.
▶Beneficial Recipient: A Person who has the right to the relevant services or Goods.

Statutory Clarifications (FAQ)

Q: What is the primary condition for income to be considered 'Qualifying Income' for a Free Zone Person?

A: The primary condition is that the income must not be attributable to a **Domestic Permanent Establishment** or a **Foreign Permanent Establishment**, nor to the ownership or exploitation of immovable property, and the entity must be a **Qualifying Free Zone Person**.

Q: When is income from a Non-Free Zone Person considered 'Qualifying Income'?

A: Income from a **Non-Free Zone Person** is **Qualifying Income** only if it is derived from **Qualifying Activities** that are not **Excluded Activities**.

Q: What is the significance of the 'Beneficial Recipient' term in Free Zone transactions?

A: For income from transactions with other **Free Zone Persons** to be **Qualifying Income**, the other **Free Zone Person** must be the **Beneficial Recipient** of the relevant services or **Goods**.

Q: Can income from leasing a property located outside a Free Zone be 'Qualifying Income'?

A: No, if the property is not located in a **Free Zone**, the income from its leasing would typically be considered revenue from an **Excluded Activity** and therefore not **Qualifying Income**.

Q: What types of revenue are excluded when calculating the 'de minimis' requirement?

A: Revenue attributable to a **Domestic** or **Foreign Permanent Establishment**, and revenue from certain transactions with immovable property located in a **Free Zone** (e.g., with **Non-Free Zone Persons** for **Commercial Property**, or with any person for non-**Commercial Property**).