United Arab Emirates Accounting & Tax Glossary

ESR are UAE regulations introduced in 2019 (updated 2020) requiring entities engaged in 'Relevant Activities' (banking, insurance, investment fund management, lease-finance, headquarter, holding, IP, distribution, shipping) to demonstrate adequate economic substance in the UAE — including local employees, expenditure and physical presence.

UAE Free Zones are special economic zones offering 100% foreign ownership, customs benefits, and (subject to QFZP rules) preferential 0% Corporate Tax on Qualifying Income. There are 40+ Free Zones across the seven emirates, each with their own Authority and licensing rules.

An FZCO is a Free Zone Company with multiple shareholders (typically 2 or more, depending on the Free Zone Authority). It is a separate legal entity with limited liability, registered with a specific UAE Free Zone Authority. Common form for founder-led businesses with co-founders.

An FZE is a Free Zone Establishment — a single-shareholder Free Zone entity, equivalent to a sole shareholder LLC. Used by solo founders incorporating in a UAE Free Zone.

A mainland UAE LLC is a Limited Liability Company registered with an emirate's Department of Economic Development (DED) — Dubai DED, Abu Dhabi DED, etc. Since 2021, 100% foreign ownership has been allowed for most activities. Can trade across the UAE without restriction (unlike Free Zones).

The Tax Registration Number is the 15-digit identifier issued by the FTA to every VAT-registered business and Corporate Tax-registered entity. It must appear on tax invoices and FTA correspondence.

Ultimate Beneficial Owner regulations require UAE companies to maintain a register of natural persons who ultimately own or control the entity (25%+ ownership or substantial control). Annual UBO declaration filed with the licensing authority.

A Qualifying Free Zone Person is a Free Zone entity that meets specific tests under the UAE Corporate Tax law to retain the 0% rate on Qualifying Income. Tests include: substance (people and assets in the Free Zone), audited financial statements, transfer pricing compliance, de minimis non-qualifying revenue (≤5% or AED 5m).

UAE Corporate Tax is the federal tax on business profits introduced by Federal Decree-Law No. 47 of 2022, effective 1 June 2023. It applies a 0% rate on the first AED 375,000 of taxable income and 9% above. Qualifying Free Zone Persons can pay 0% on Qualifying Income. Multinational groups within Pillar Two scope face a 15% Domestic Minimum Top-up Tax from 1 January 2025.

UAE VAT is a 5% federal tax on most goods and services, introduced 1 January 2018. Mandatory registration at AED 375,000 annual turnover; voluntary at AED 187,500. Standard rate 5%; some supplies are zero-rated (exports, healthcare, education) or exempt (residential rent, financial services, local passenger transport).