Client Background

Our client is a fast-growing technology company registered in the Dubai Multi Commodities Centre (DMCC) free zone since 2020. With 50 employees, the company provides SaaS solutions and custom software development services to clients across the GCC, Europe, and North America. Their annual revenue had grown to approximately AED 18 million by 2023, with a mix of local UAE clients (30%) and international clients (70%).

The Challenge

With the UAE Corporate Tax law coming into effect for financial years starting on or after June 1, 2023, the company faced several complex questions:

• Whether they qualified as a Qualifying Free Zone Person (QFZP) eligible for the 0% CT rate
• How to categorize their revenue between qualifying and non-qualifying income
• Whether their contracts with UAE mainland clients would disqualify them from QFZP status
• How to structure their accounting systems to track CT-relevant categories
• FTA registration requirements and deadlines

The company's CFO had received conflicting advice from different sources — some suggesting they would owe 9% CT on all revenue, others claiming complete exemption. Without clarity, the company was at risk of either overpaying taxes or facing penalties for non-compliance.

Our Approach

Al Mobaderoon was engaged in March 2023, three months before the CT law took effect for the company's financial year. We deployed a systematic approach to ensure full compliance while maximizing legitimate tax benefits:

Phase 1: Activity Assessment & QFZP Eligibility (Weeks 1–3)

We conducted a detailed analysis of every revenue stream and client contract. We reviewed the company's DMCC license activities, examined the nature of services provided to each client category, and mapped these against the Qualifying Activities listed in Cabinet Decision No. 55 of 2023. Our assessment confirmed that approximately 85% of revenue came from qualifying activities (software development services exported outside the free zone and SaaS subscriptions to overseas clients).

Phase 2: Income Segregation & Accounting Setup (Weeks 3–6)

We restructured the company's chart of accounts and accounting system (Xero) to clearly segregate qualifying income from non-qualifying income. We created dedicated revenue categories, cost centers, and tracking dimensions that would make CT return preparation straightforward. We also established transfer pricing documentation for transactions between the company and its mainland subsidiary, ensuring arm's length pricing compliance.

Phase 3: Compliance Structure & Registration (Weeks 6–8)

We prepared the company's substance requirements documentation to support their QFZP claim — including adequate employee headcount in the free zone, qualifying expenditure thresholds, and core income-generating activity evidence. We then registered the company with the FTA for Corporate Tax, filed the necessary elections, and prepared a compliance calendar for all future filing obligations.

Phase 4: Staff Training & Handover (Weeks 8–10)

We trained the finance team on maintaining proper records for CT purposes, including how to classify new contracts, handle mixed-use expenses, and maintain the substance requirements on an ongoing basis. A detailed CT compliance manual specific to their business was delivered.

Results & Impact

The engagement was completed in May 2023, with the company fully prepared before their first CT period began. The outcomes were significant:

• AED 320,000 in annual tax savings — by legitimately qualifying for the 0% CT rate on 85% of income
• Full QFZP status confirmed with robust documentation to support any future FTA audit
• Only AED 48,600 in CT liability on non-qualifying mainland revenue (vs. AED 368,600 if QFZP status was not established)
• Automated tracking through properly configured accounting system requiring minimal manual intervention
• Compliant transfer pricing documentation protecting against related-party transaction challenges

The company now operates with complete clarity on their CT obligations and has engaged Al Mobaderoon on a retainer basis for ongoing CT advisory and annual return preparation. Their proactive approach to compliance has also strengthened investor confidence as they pursue their Series B funding round.