Assistant Manager, UAE Corporate Tax

Alpha FZE (free zone) provides IT support to Beta FZE (free zone) for AED 4m a year. Beta’s only business is a services contract with a mainland bank, under which Beta must deliver exactly the IT support it buys from Alpha, at a 10% mark-up. Alpha’s contract with Beta does not mention the bank.

(a) Is Alpha’s AED 4m qualifying income?

(b) List the documents and contract terms you would want to see before signing off on the answer you have just given.

Delta FZE is registered in a Designated Zone and imports steel coils from Korea. Some shipments are landed at Jebel Ali and moved into the Designated Zone. Others are shipped straight to a mainland customer’s yard, with title passing to Delta while the goods are at sea and all paperwork raised from the Designated Zone office. Its customers are a mainland fabricator who cuts and sells on, a mainland contractor who consumes the steel in its own projects, and a UAE registered charity building a school. Buying and pricing decisions are taken by two employees in the Designated Zone, but any price above a set limit needs sign-off from group treasury in Singapore. Delta also keeps three staff at the mainland customer’s yard doing quality checks and taking repeat orders.

Which revenue streams can be qualifying income, and what other exposure do you see?

Epsilon FZE holds a DFSA licence and provides discretionary portfolio management. In 2025 it earned AED 12m of management fees from individual clients resident in Dubai, AED 3m of advisory fees from a mainland family office, and AED 800,000 of referral commissions from an unregulated sister company for introducing the same individuals to a property broker. Epsilon’s tax manager has prepared the return on the basis that all income from individuals is non-qualifying, because transactions with natural persons are an Excluded Activity. Set out the correct position on each stream, and conclude on Epsilon’s status for the year.

(a) Sigma LLC transfers an independent part of its business, net book value AED 40m, to Theta LLC in exchange for shares. Theta issues shares valued at AED 25m. Sigma’s previous adviser says the relief is unavailable because the shares must equal net book value. Is the adviser right? If the position is not free from doubt, can Sigma ask the FTA, and on what grounds could the FTA decline?

(b) Fourteen months after the transfer, Theta’s original shareholders sell 30% of their pre-existing shares, not the shares issued in the restructuring, to an outside investor. Is the relief clawed back?

Mr Rashid owns 100% of P LLC and 60% of Q LLC, both UAE mainland, both with a 31 December year end. On 1 July 2025 P sells a plant to Q. Net book value in P’s books is AED 8m; independent market value is AED 20m; Q pays AED 8m in cash and records the plant at AED 8m, depreciating it over ten years. Neither is in a Tax Group and no group relief election has been made.

(i) Are P and Q Related Parties, and on what basis?

(ii) What adjustment must P make in its 2025 return, and why?

(iii) What can Q do with the AED 12m difference, and on what condition?

(iv) P’s finance director decides to make no adjustment because P has brought forward losses. What is the consequence for Q?

(v) If Q had instead paid AED 30m, what election is available, and to whom?

(vi) How would your answer to (iii) change if the transfer had been made under Qualifying Group Relief?