Family enterprises in the UAE encouraged to focus on tax strategies as corporate tax implementation unfolds
Family businesses operating in the United Arab Emirates (UAE) must promptly implement comprehensive tax planning strategies to remain compliant with the nation's evolving corporate tax system, according to Shiraz Khan, Partner and Head of Taxation at Al Tamimi & Company.
Addressing participants at the sixth edition of the New Age Finance and Accounting (NAFA) Summit, organized by Khaleej Times, Khan underscored the importance of precise and complete tax returns, supported by relevant documentation, to facilitate potential future audits by UAE tax authorities.
"Documentation is vital to justify deductible expenses," emphasized Khan. "Without verifiable evidence, you might forfeit your right to claim such expenses—even if they're legally deductible."
He delineated that businesses are now required to retain tax records for seven years, which breaks from previous VAT guidelines. In addition, companies must maintain detailed records for foreign tax credits, withholding tax certificates, and group loss offsets—which offer up to 75 percent loss relief across group entities.
The UAE's Federal Tax Authority (FTA) established the 9 percent corporate tax in 2023.
Identifying family businesses as primary beneficiaries, Khan advocated the establishment of holding structures—particularly in UAE free zones—to harness zero percent tax rates as long as conditions related to qualifying income, substance requirements, and transfer pricing compliance are satisfied.
"Transfer pricing regulations are now in effect, and related party transactions should be reported and validated through recognized methods," said Khan. He recommended arm's length pricing and functional analysis where necessary.
Khan also encouraged examining tax grouping to streamline consolidated filings and simplify intra-group compliance. Furthermore, he suggested reviewing double tax treaties with over 100 countries to minimize withholding taxes and the risks associated with permanent establishments.
Underscoring the significance of compliance, Khan warned that failure to conform to the new rules might result in severe financial penalties, damage to reputation, and regulatory setbacks. He advised family-owned companies to invest in formalized internal tax policies, create dedicated tax functions, and actively manage tax risks.
"Tax has become a substantial cost that can impact business continuity," Khan asserted. "Every family business should be aware of the updated rules, adapt, and organize operations efficiently—especially considering the increasing prevalence of mergers and acquisitions and generational transitions."
Khan also highlighted time-limited opportunities, like small business relief for companies with revenues below Dh3 million, lasting until the end of 2026, along with exemptions for foreign permanent establishments—but emphasized that these advantages must be applied for in advance.
Ultimately, Khan emphasized the necessity of thorough documentation. "Ensure you can substantiate every position in your tax declaration," he urged. "If there are uncertainties, seek legal or tax opinions, and always ensure records are readily available."
- Family businesses operating in the United Arab Emirates (UAE) must pay attention to the updated rules, adapting and organizing their operations efficiently, as failure to conform to the new regulations might result in severe financial penalties, damage to reputation, and regulatory setbacks.
- To harness zero percent tax rates in the UAE free zones, family businesses are advised to establish holding structures, with attention paid to qualifying income, substance requirements, and transfer pricing compliance.
- With the increasing prevalence of mergers and acquisitions and generational transitions, it is essential for every family business to be aware of the updated tax rules, invest in formalized internal tax policies, create dedicated tax functions, and actively manage tax risks, as tax has become a substantial cost that can impact business continuity.
