Article 18: The Substance Friction

The High-Stakes Shift

Under Federal Decree-Law No. 47, the transition from a 0% to a 9% corporate tax environment hinges on one critical factor: Economic Substance. For ADGM and DIFC entities, "Substance" is no longer a check-box exercise; it is a forensic requirement.

"Failure to demonstrate adequate substance doesn't just result in a fine—it results in the total reclassification of your entity, backdating tax liabilities to the start of the fiscal period."

Common Audit Triggers

• Board Management: Lack of physical board meetings held within the UAE jurisdiction.
• Operating Expenditure: Disproportionate levels of "offshore" service fees relative to local operational costs.
• Core Income Generating Activities (CIGA): Outsourcing critical decision-making to parent companies outside the UAE.