By Bill Anderson, FCCA, Chief Executive Officer — Assetica, Dubai, UAE
Definition: Since the UAE introduced corporate tax at 9% on taxable income above AED 375,000, transactions that used to be routine group housekeeping now need an evidenced market value. The Federal Tax Authority expects arm's length values for group restructurings, related-party and connected-person transfers of shares or a business, and claims for qualifying group relief or business restructuring relief. Assetica prepares FTA-defensible valuations to RICS and IVS standards, with QFZP status modelled where it applies.
0% on taxable income up to AED 375,000. 9% above AED 375,000. 0% for a Qualifying Free Zone Person on qualifying income. Typical Assetica report turnaround is five to seven business days.
Group restructuring, where a business or assets move into a new structure and the FTA can test the price. Related-party transfers, where transfer pricing requires connected-person dealings at arm's length rather than book value. Qualifying group relief and business restructuring relief claims, which rest on defensible values for what moves between entities. And QFZP status, because whether a free zone entity keeps its 0% rate on qualifying income changes after-tax cash flows and therefore the valuation itself.
A stated valuation date and standard of value, recognised methodology (usually DCF and market multiples cross-checked against assets), earnings normalised for one-off and owner-related items, and independence from the party benefiting from the outcome. A valuation prepared by the party that gains from the answer is the first thing a reviewer discounts.
Corporate tax valuations sit within Assetica's core business valuation in Dubai practice, and often accompany a Golden Visa business valuation or a DIFC business valuation.
Do I need a business valuation for UAE corporate tax?
You need one whenever a transaction must be priced at market value for tax purposes. The most common triggers are group restructurings, related-party transfers of shares or a business, and claims for qualifying group relief or business restructuring relief. The FTA expects arm's length values that can be supported if reviewed.
Can I transfer shares between my own companies at book value?
Generally no. Transfer pricing rules require related-party dealings to be at arm's length market value, not book value or a figure chosen for the tax result. An independent valuation evidences the market value and protects the position if the FTA reviews it.
What does the FTA look for in a valuation?
A clear valuation date and standard of value, recognised methodology (usually DCF and market multiples cross-checked against assets), earnings normalised for one-off and owner-related items, and independence from the party benefiting from the outcome, all documented so the figure can be defended.
How does the 9% corporate tax change my DCF?
Tax must be computed on adjusted taxable income rather than accounting EBITDA, with disallowable costs added back, and applied above the AED 375,000 threshold. It reduces free cash flow and therefore value, and the terminal value assumption matters as much as the forecast period. QFZP status, where it applies, changes the picture again.
Does free zone (QFZP) status affect the valuation?
Yes, materially. A Qualifying Free Zone Person pays 0% on qualifying income, so whether that status holds through the forecast is a genuine valuation variable, not a compliance footnote. We model it explicitly and disclose the assumption.