Understanding the 9% Corporate Tax
The UAE introduced a federal corporate tax of 9% on business profits exceeding AED 375,000. However, not all businesses are treated equally. Certain Free Zone entities can still benefit from a 0% corporate tax rate, provided they qualify as a Qualifying Free Zone Person (QFZP).
Who is a Qualifying Free Zone Person (QFZP)?
To be treated as a QFZP, the entity must:
- Be a UAE Free Zone company with a valid license.
- Derive income solely from qualifying activities, such as international trading, holding company structures, fund management, or outsourcing services.
- Avoid doing business with mainland UAE customers (unless through a taxed branch).
- Maintain adequate substance in the UAE, which includes having:
- A physical office (e.g., flexi-desk)
- Resident director or nominee director
- Active bank account
- Local bookkeeping
- Prepare and submit audited financial statements annually.
Why This Matters to CSP Clients
As a Corporate Service Provider, guiding your clients through this landscape is crucial. Many entrepreneurs, especially digital business owners and international investors, are unaware of the fine line between qualifying and disqualifying income. A minor mistake in structuring can lead to a 9% tax liability instead of 0%.
This is your moment to position your services around strategic compliance:
- Company structuring advice based on business model and revenue source
- Nominee director appointments for economic substance
- Accounting and audit support
- Corporate tax registration and filing service
- ESR guidance to meet substance rules
How to Help Clients Maximize the 0% Tax Advantage
- Choose the right Free Zone: Not all Free Zones are equal. Those with a proven record of compliance support (like IFZA, RAKEZ, and DMCC) are better positioned for QFZP qualification.
- Document everything: Intercompany transactions (especially with foreign parent companies) must follow arm's length pricing and have supporting agreements.
- Avoid gray zones: Some Free Zone companies unknowingly conduct mainland activity via delivery or remote consulting. This can disqualify them unless done through a properly taxed branch.
CSP Opportunity: Move from Formation to Compliance Partner
The role of a CSP in 2025 is evolving. You’re no longer just opening companies—you’re managing ongoing risk. The best CSPs are becoming strategic advisors for:
- Tax planning
- Cross-border structuring
- Document drafting
- Banking advisory
- Post-license compliance
This creates recurring income opportunities, higher client retention, and greater perceived value in an increasingly competitive market.
Final Thoughts
The new tax era in the UAE is not a threat—it’s a chance for CSPs to rise above generic service providers and offer real advisory value. Clients don’t just want fast company formation anymore—they want smart, compliant, tax-efficient structures.
Want help structuring your next QFZP setup?
Let’s talk — our legal and compliance team is ready to support your clients with tailored solutions.
