Corporate Tax for ADGM-Registered Companies

Introduction

The Abu Dhabi Global Market (ADGM) is a leading international financial centre in the UAE, located on Al Maryah Island in Abu Dhabi. Known for its independent common law legal framework, business-friendly regulations, and strong financial infrastructure, ADGM has become a hub for banks, investment funds, fintech companies, family offices, and professional services.

With the introduction of the UAE Corporate Tax regime under Federal Decree-Law No. 47 of 2022, ADGM companies now fall within the scope of UAE corporate taxation. However, like other designated free zones, ADGM offers potential 0% corporate tax benefits for entities that qualify as Qualifying Free Zone Persons (QFZPs).

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1. Applicability of Corporate Tax to ADGM Companies

• General Rule: All companies in ADGM are subject to UAE corporate tax unless they are fully exempt under the law (e.g., government entities, certain natural resource businesses).

• Free Zone Incentive: QFZPs in ADGM can enjoy a 0% corporate tax rate on qualifying income.

• Standard Tax Rates:

o 0% on taxable income up to AED 375,000 for all companies.

o 9% on taxable income above AED 375,000 (unless it qualifies for the 0% rate on qualifying income).

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2. Qualifying Free Zone Person (QFZP) Requirements for ADGM

To benefit from the 0% rate, an ADGM company must meet all conditions set by the UAE Ministry of Finance:

a) Adequate Substance in ADGM

• Maintain a physical office in ADGM.

• Employ sufficient qualified staff in the jurisdiction.

• Incur operational expenses proportional to the size and nature of the activity.

b) Earn Qualifying Income from Approved Activities

Qualifying Activities include:

• Regulated financial services (banking, insurance, asset management, fund administration).

• Headquarter services to related parties.

• Treasury, financing, and funding services to related parties.

• Holding company activities.

• Certain distribution activities in or from a Designated Zone.

• Certain intellectual property activities.

c) Compliance with Transfer Pricing Rules

• Apply the Arm’s Length Principle for related-party transactions.

• Maintain required Transfer Pricing documentation.

d) Compliance with Economic Substance Regulations (ESR)

• File ESR Notifications and Reports annually.

e) Non-Qualifying Income Limit

• Non-qualifying income should not exceed the lower of 5% of total revenue or AED 5 million.

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3. Qualifying vs. Non-Qualifying Income in ADGM

Income Type Tax Rate

Qualifying transactions with other free zone persons 0%

Qualifying transactions with mainland UAE customers 0%

Passive income from mainland (interest, dividends, royalties) 0%

Non-qualifying activities (retail sales to mainland, certain IP) 9%

Income from excluded activities (natural resources, unapproved IP) 9%

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4. Corporate Tax Registration for ADGM Entities

All ADGM-registered companies — whether enjoying the 0% rate or not — must:

• Register with the Federal Tax Authority (FTA) for corporate tax.

• Obtain a Tax Registration Number (TRN).

• File annual corporate tax returns via the EmaraTax portal.

• Maintain IFRS-compliant financial statements.

• Have their accounts audited (mandatory under ADGM regulations).

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5. Compliance Timeline for ADGM Companies

1. Registration Deadline: Based on the company’s trade licence issue date (as notified by the FTA).

2. Tax Period: Usually the Gregorian calendar year (Jan–Dec), but can be different if approved.

3. Filing Deadline: Within 9 months after the end of the tax period.

4. Record Keeping: Minimum 7 years.

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6. Risks of Losing QFZP Status

If an ADGM entity fails to meet QFZP criteria:

• The 0% corporate tax rate is lost for that tax period.

• The 9% rate applies to the entire taxable income.

• The company may face penalties for non-compliance.

• Loss of free zone incentive status could impact future competitiveness.

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7. Strategic Planning for ADGM Businesses

To optimise tax position and remain compliant:

• Review QFZP status annually.

• Monitor income sources to ensure they stay within qualifying limits.

• Maintain economic substance and proper documentation.

• Ensure transfer pricing compliance for all related-party transactions.

• Seek specialist tax advice for complex structures.

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8. How Sheikh Anwar Accounting and Auditing LLC Can Help

We specialise in assisting ADGM companies with:

• QFZP eligibility assessments and documentation.

• Corporate tax registration and return filing.

• Transaction structuring to protect the 0% benefit.

• Economic Substance and Transfer Pricing compliance.

• Ongoing advisory to keep up with UAE tax law changes.

With expert guidance from Sheikh Anwar Accounting and Auditing LLC, your ADGM business can remain compliant, tax-efficient, and strategically positioned for growth.

📍 Dubai, UAE

🌐 Website: www.sa-auditors.com