Three years into the UAE Corporate Tax regime, the questions taxpayers are asking have shifted. Early on, businesses wanted to know the basics – who’s in scope, what the rate is, how to register. Today, the questions are far more granular: how substance is tested for a specific activity, whether a particular customer relationship qualifies as a Beneficial Recipient, or how a transitional relief election applies to a phased real estate development.

The Federal Tax Authority’s newly released Summary of Private Clarifications issued up to May 2026 reflects that shift. It doesn’t introduce new law. Instead, it consolidates real questions the FTA has fielded from taxpayers and its answers to them into a single reference document spanning 20 topic areas, from Free Zone substance and Qualifying Income to Family Foundations, Participation Exemption, and transitional relief.

For Free Zone businesses in particular, this is one of the clearest signals yet of how the FTA is applying the rules in practice, beyond what’s written in the legislation itself.

The throughline: Substance and intent matter more than form

Read across the 20 topics, a pattern emerges. The FTA is consistently looking past the formal structure of a business – its licence, its paperwork, its stated purpose – towards what’s actually happening on the ground. 

A Free Zone company renting out property doesn’t automatically fail the adequate substance test for lacking employees, but it does need people actually performing the core functions of that activity – contract administration, lease renewal oversight, and so on. Conversely, employees seconded from a related party can still count toward substance, and a shared workspace can be sufficient, provided both are genuinely fit for the scale of the business.

The same logic runs through Qualifying Income. Whether a customer counts as the “Beneficial Recipient” of goods turns on whether legal ownership and the unrestricted right to use or resell has genuinely passed, not on how the invoice is worded. And overseas warehousing or third-port trading won’t automatically disqualify a distributor from Qualifying Free Zone Person status, as long as the real income-generating work still happens in the Designated Zone.

Where the FTA drew firmer lines!

Not every clarification bends towards the taxpayer. A few answers close off interpretations businesses may have been hoping for:

• Speculative derivatives trading doesn’t fall within the Qualifying Activity of trading Qualifying Commodities, only derivatives genuinely linked to hedging physical trading risk do.

• Option writers (as opposed to holders) don’t qualify under the share-holding investment activity.

• Matched-principal brokerage and execution-only services sit outside wealth and investment management as a standalone Qualifying Activity though they can ride along as an ancillary activity if the core qualifying service is also present.

• Company manufacturing goods entirely offshore, even if the sale is booked through a UAE Free Zone entity, doesn’t get to treat that as a “distribution” Qualifying Activity, it’s manufacturing conducted abroad, and it doesn’t qualify.

Practical clarity on structuring questions

Several answers will be directly useful for advisory conversations: 

• Branches across multiple Free Zones are assessed collectively as one Qualifying Free Zone Person, not location by location though each activity still needs its own substance and qualifying-activity assessment. 

• Transfer pricing adjustments made correctly in the Corporate Tax Return won’t retroactively disqualify QFZP status, even if the financial statements didn’t reflect arm’s-length pricing at the time. 

• Family Foundations can hold real estate and still qualify for tax-transparent treatment, provided that activity doesn’t require a license and a single underlying entity can be jointly owned by more than one Family Foundation without breaking the ownership condition.

• Beneficial (not just legal) ownership is enough to satisfy the Participation Exemption’s ownership tests and the 75% common ownership test for loss transfers that are useful for groups with nominee or custodial holding structures.

• The AED 4,000,000 minimum ownership threshold for Participation Exemption overrides the standard 5% ownership and entitlement tests entirely, for all tax periods since June 2023.

What This Means for Your Structure

None of this changes the underlying law. But for businesses going through audits, restructuring holding chains, or simply trying to defend a Free Zone tax position, private clarifications like these are often the closest thing to real-world precedent the UAE Corporate Tax regime has. They show where the FTA’s scrutiny is likely to land and where a well-documented, substance-backed position will hold up.

If your structure touches on Free Zone qualifying activities, Family Foundation transparency, or Participation Exemption, this is a good moment to revisit it against the FTA’s current thinking rather than assumptions made when the law first came into effect.