UAE Corporate Tax Compliance in the Jebel Ali Free Zone

UAE Corporate Tax Compliance in the Jebel Ali Free Zone

Why UAE Corporate Tax Matters for JAFZA Businesses

• Contrary to common belief, being located in a Free Zone does not automatically exempt a company from corporate tax. Under Federal Decree-Law No. 47 of 2022 (effective June 1, 2023), all companies — including those in JAFZA — are considered Taxable Persons and must fulfil various compliance obligations.

• However, Free Zone companies can benefit from a 0% corporate tax rate on qualifying income — if they meet stringent conditions defined under UAE tax laws.

Corporate Tax Registration

• All JAFZA companies, including Free Zone Persons, must register for UAE Corporate Tax with the Federal Tax Authority (FTA) unless a specific exemption applies. Registration is mandatory even if:

• the company has no profit,

• the company is dormant, or no activities were carried out during the year.

• Failure to register on time can attract administrative penalties.

• Once registered, the FTA issues a Tax Registration Number (TRN) — the cornerstone of your corporate tax compliance journey.

Qualifying for 0% Corporate Tax (Qualifying Free Zone Person)

• To enjoy the 0% tax rate on qualifying income, a JAFZA entity must meet all conditions to be recognised as a Qualifying Free Zone Person (QFZP). These include:

• Maintaining adequate substance in the UAE

• Engaging in Qualifying Activities as defined under the Corporate Tax Law

• Complying with transfer pricing rules and documentation

• Not electing into the standard corporate tax regime

• Deriving Qualifying Income (e.g., export income or transactions with other qualifying Free Zone entities)

• Avoiding Excluded Activities, such as certain financial or real estate activities that trigger standard taxation

• If any one condition is breached, the company loses the 0% benefit for the current tax period and the next four tax periods — with all its income taxed at the standard 9% rate.

Annual Corporate Tax Filing

• Every taxable entity in JAFZA must file a corporate tax return with the FTA, even if:

• there is no profit,

• the income is fully qualifying, or the company is in a loss position.

• The corporate tax return must be filed within 9 months after the end of the company’s financial year, and any tax due must be settled within the same timeframe.

• FTA mandates that all companies keep accurate books, records, and supporting documentation for at least 7 years.

Financial Statements & Audits

• In addition to tax filings, JAFZA companies must prepare IFRS-compliant financial statements and conduct an annual audit — a requirement enforced by the Free Zone Authority itself.

• These audited accounts often form the basis for tax reporting and transfer pricing compliance. Appointing a JAFZA-approved auditor ensures smooth compliance and minimises regulatory risk.

Transfer Pricing & Related Party Transactions

• JAFZA companies engaging with related parties — whether within the UAE or abroad — must adhere to arm’s length pricing and maintain appropriate transfer pricing documentation. This compliance is part of the broader UAE corporate tax regime to prevent base erosion and profit shifting.

Penalties & Non-Compliance Risks

• Non-compliance with corporate tax obligations can result in:

• Loss of 0% tax benefits

• Administrative fines for late registration or filing

• Increased scrutiny from FTA

• Reassessment of past periods with penalties and interest

• It’s therefore essential to engage experienced tax professionals to ensure end-to-end compliance and avoid costly pitfalls.

How Gupta Accountants Can Help

• At Gupta Accountants, we provide tailored support across the full compliance lifecycle for JAFZA companies, including:

• Corporate Tax Registration & TRN support

• Annual corporate tax filing with the FTA

• IFRS financial statement preparation

• Audit coordination with JAFZA-approved auditors

• Transfer pricing documentation & advisory

• Strategic tax planning & optimisation

• Our team combines local expertise with international best practices — ensuring you remain fully compliant while maximising your tax efficiencies.