The FTA's Private Clarifications Summary, What It Says

Downloadct-private-clarifications-summary-may-2026.pdf

This is the most useful Corporate Tax document the FTA has released this year. It is also the one most likely to be misread.

What a private clarification is

If you have a position you are not sure about, you can apply to the FTA for a private clarification. You set out your facts. The FTA tells you in writing how it reads the law on those facts.

The answer binds the FTA only in relation to you, on the facts you gave. It is not published. Nobody else sees it.

That is why this summary matters. For three years the FTA has been answering these questions privately, and the answers have circulated as hearsay through advisers who happened to have seen one. This document puts a large number of them on the record.

The first thing to understand

The summary is not law. You cannot rely on it as law.

It creates no new rules and changes nothing in the Corporate Tax Law, the Cabinet Decisions or the Ministerial Decisions. It is a record of how the Authority has read rules that already exist.

The practical value is different. If you are about to take a position, this tells you the answer you would probably get if you asked. That is worth knowing before you file, not after.

Where your facts differ from the facts in the summary, the answer may differ too. If the amount at stake is material, apply for your own clarification. The FTA published a separate guide on how to do that, TPGPC1, on 15 July 2026.

What it covers

Thirty topics. The main headings are:

Exempt persons, covering qualifying investment funds, qualifying limited partnerships and REITs Permanent establishment Unincorporated partnerships Family foundations Free zones, split across qualifying free zone person status, adequate substance, qualifying income, transactions with other free zone persons, and income from qualifying intellectual property Qualifying activities, taken one at a time, including processing of goods, trading of qualifying commodities, holding of shares and securities, ships, reinsurance, wealth and investment management, headquarter services, treasury and financing, aircraft financing and leasing, distribution in or from a designated zone, logistics, and ancillary activities Taxable income Participation exemption Allowable deductions Losses Tax group Registration Financial statements Tax period Transitional relief

The free zone section is the longest by a distance. That tells you where the questions have been coming from.

The answers worth your time

A free zone branch is not part of your qualifying income

Where a qualifying free zone person has a permanent establishment, the FTA treats that establishment as a separate and independent taxable person, and as a related party of the free zone person. Its income is not qualifying income. Its activities are not counted when the free zone conditions are assessed.

What this means. If you run a mainland branch off a free zone entity, you cannot use the branch to help you meet the free zone tests, and the branch profit is taxed at 9%. Some groups have been assuming the opposite.

A transfer pricing adjustment in the return does not cost you free zone status

If you did not record transactions with related parties at arm's length in your financial statements, but you make the appropriate transfer pricing adjustment in your Corporate Tax return, you are not disqualified from being a qualifying free zone person for that period.

What this means. This is a genuinely helpful answer. Getting the accounts wrong is fixable in the return. It does not destroy your 0% position.

Adequate substance with no employees usually fails

A free zone company letting property to related parties inside the zone asked whether it could meet the adequate substance test with no employees at all.

The FTA said the test is applied case by case, looking at the level of activity, whether there are adequate assets, an adequate number of qualified full-time employees, and adequate expenditure for each activity. There is no exception for an activity that is asset-based or passive.

It then gave the reasoning. For a property letting business, having no full-time employees may show that nobody is performing the core income-generating activities of leasing. It listed those as contract administration, compliance monitoring, oversight of lease renewals, and enforcement of contractual rights. On those facts, the test is not met.

What this means. A passive holding or letting company inside a free zone, with no people, is exposed. If you have structures like this, look at them before September.

Employees on another company's visa still count

Staff who work full-time in the free zone, under the free zone person's control and supervision, can be qualified full-time employees even though their work visas were issued by a related party.

What this means. Common in family groups where one entity holds the establishment card. The visa arrangement does not by itself break your substance position.

REIT investors are not taxed on unrealised gains

An investor in a REIT that is a qualifying investment fund is taxed on their share of the net income available for distribution in the fund's financial statements. Unrealised gains of the fund are excluded, because unrealised gains cannot be distributed.

The summary also settles a narrower point. A REIT must float at least 20% of its shares, and the REIT, its related parties and connected persons must not subscribe for or buy the floated shares. That restriction applies only to the 20% that has to be floated, not to every floated share.

Beneficial ownership is enough to transfer losses

For transferring losses between taxable persons, beneficial ownership held by a third person satisfies the ownership test. Three conditions must hold. The holder has the right to the economic benefits, meaning profits and liquidation proceeds. The interest is recognised as equity under the accounting standards that holder uses, or would be under standards acceptable in the UAE. And the holder controls the interest.

On timing, the tax periods of transferor and transferee must end on the same day but do not have to start on the same day. The 75% ownership condition must hold throughout the period in which the transferor incurred the loss, up to the end of the transferee's period in which it is used.

What this means. Groups with staggered year ends and stub periods can still transfer losses. The test is on the end date, not the start.

Transitional relief cannot create a loss

If disposing of qualifying immovable property leaves you with a tax loss after adjusting for the excluded gain, that loss cannot be carried forward. Transitional relief is capped at the accounting profit on the disposal.

Only the accounting profit attributable to the qualifying immovable property can be reduced, and only by the pre-Corporate Tax gain on that same property. That gain is the difference, at the start of your first tax period, between the market value and the higher of original cost or net book value.

For developers, disposal follows IFRS. Where you recognise revenue on percentage of completion under IFRS 15, the disposal happens in the periods in which the revenue and the associated land and construction costs are released to the profit and loss account.

What this means. Property companies claiming transitional relief cannot use it to manufacture a carried forward loss. If your working papers assume otherwise, change them before you file.

Who should read it

If you are a free zone company, read the free zone sections in full. They are roughly half the document and the answers are specific.

If you hold property and elected transitional relief, read the last section.

If you are a fund, a REIT or a family foundation, read the exempt persons section.

Everyone else can read the headings and stop where something matches their facts.

What we do with it

We hold the official text of this and every other FTA release, and we check client positions against it before filing rather than after.

If you have a Corporate Tax position you are not comfortable with, and your return is due 30 September, send it to us now. There is time to check it against the FTA's own stated view, and time to apply for your own clarification if the amount justifies it.