Author
Julian Koop
Attorney at Law (Germany) I Legal and Tax Consultant (UAE) I Associate
October 2026 – Tax – Corporate Tax
The UAE Cabinet has added the RAK International Corporate Centre (RAK ICC) to the list of Free Zones for corporate tax purposes. Cabinet Resolution No. 109 of 2026 is dated 13 July 2026 and applies retroactively from 1 June 2023, the start of UAE corporate tax.
Until now, RAK ICC was a corporate registry rather than a Free Zone. Its companies were therefore generally subject to the standard corporate tax rate of 9 per cent. They can now apply 0 per cent to qualifying income as a Qualifying Free Zone Person (QFZP), provided they meet the statutory conditions.
The status is not automatic: it does not apply to every company or to all income. This article summarises what changes, which conditions apply and what owners of existing RAK ICC companies should now review.
What Has Changed?
- RAK ICC now appears on the Free Zone list of Cabinet Resolution No. 54 of 2023.
- The recognition applies retroactively from 1 June 2023.
- RAK ICC companies can claim QFZP status and apply 0 per cent to qualifying income. Other income stays at 9 per cent.
- According to PwC, the Qualifying Activity of holding shares and other securities for investment purposes does not require a licence from a Competent Authority.
Note: Being added to the Free Zone list does not automatically mean 0 per cent tax. Each company must meet the conditions individually.
What Conditions Apply for the 0 Per Cent Rate?
A QFZP must meet several conditions at the same time. According to the overviews available, these include:
| Condition | Content |
|---|---|
| Adequate substance | The company must demonstrate adequate economic substance |
| Qualifying income | Only income from qualifying activities, or from transactions with other Free Zone persons, is taxed at 0 per cent |
| Audited financial statements | The financial statements must be audited |
| Transfer pricing | Transfer pricing rules must be complied with |
| De minimis threshold | Non-qualifying revenue must stay below the lower of 5 per cent of total revenue and AED 5 million |
Qualifying and Excluded Activities
Qualifying activities include, among others:
- Holding shares and other securities
- Wealth and investment management, and fund management
- Headquarter, treasury and financing services to related parties
- Manufacturing and processing of goods, logistics services and operating ships
Excluded activities include, among others:
- Transactions with natural persons, subject to certain exceptions
- Ownership and exploitation of intellectual property
- Immovable property transactions, with exceptions for commercial property in Free Zones
- Regulated banking, insurance, finance and leasing activities
Note: Pure portfolio holding companies and personal investment companies in particular may struggle to meet the conditions. Some investment income falls outside 0 per cent even with QFZP status.
Retroactivity from 1 June 2023: What Does It Mean?
Because the recognition is retroactive, existing RAK ICC companies can reassess their earlier tax filings. According to the PwC analysis, this covers:
- Returns already filed and returns still open for tax periods from 1 June 2023
- Elections, in particular any decision under Article 19 of the Corporate Tax Law
- The option to amend returns and, where 9 per cent was paid on qualifying income, to claim refunds where applicable
Procedure and deadlines for corrections and refunds are not fully addressed in the overviews available. They should be clarified case by case.
Alternative: The Family Foundation Regime under Article 17
For family structures, the Family Foundation regime can be an alternative to QFZP status. Qualifying RAK ICC foundations can be treated as fiscally transparent, so that income is not taxed at foundation level. Companies owned by a foundation can therefore choose between transparency and standalone QFZP status.
| Feature | QFZP status | Family Foundation |
|---|---|---|
| Basic principle | 0 per cent on qualifying income | Fiscal transparency of the foundation |
| Scope | Only qualifying income and activities | Not limited to particular income or activities |
| Requirements | Substance, audited financial statements, transfer pricing, de minimis threshold | A qualifying foundation and wholly owned, controlled entities in an unbroken chain of transparent entities |
What Companies Should Watch Now
- Review earlier filings. Review the tax returns and elections since 1 June 2023 and collect the supporting evidence.
- Test the QFZP conditions. For each company, check substance, audited financial statements, transfer pricing and the de minimis threshold.
- Classify income. Establish which income is qualifying and which remains at 9 per cent.
- Compare structures. For each company, compare QFZP status with the Family Foundation regime.
- Assess amendment and refund. Establish whether amending earlier returns and claiming a refund is an option.
- Obtain legal and tax advice. Have the decision reviewed by specialists before amending returns or restructuring.
Frequently Asked Questions
Do RAK ICC companies now automatically pay 0 per cent tax?
No. QFZP status requires the company to meet the statutory conditions. Only qualifying income is taxed at 0 per cent; other income is taxed at 9 per cent.
Does the change also apply to earlier years?
Yes, the recognition applies retroactively from 1 June 2023. Whether and how this leads to amendments or refunds depends on the individual case and on the tax authority’s procedure.
Is the status suitable for pure portfolio holding companies?
Not always. Pure portfolio structures may struggle to meet the conditions. For some family structures, the Family Foundation regime may fit better.
Do I need a licence to hold investments?
According to PwC, the qualifying activity of holding shares and securities for investment purposes does not require a licence from a Competent Authority. Check this case by case.
Can RAK ICC issue a Free Zone licence?
Since January 2025, RAK ICC has reportedly been able to issue Free Zone commercial licences to its companies. This is separate from the tax recognition as a Free Zone.
How TME Legal Can Help
TME Legal advises companies and wealth owners on corporate structures and corporate tax in the UAE. Our services in this area include:
- Reviewing the QFZP conditions for existing RAK ICC companies
- Assessing earlier tax returns and possible amendments
- Comparing QFZP status and a Family Foundation structure
- Advising on substance, transfer pricing and documentation
- Supporting restructurings and company formations
If you would like your RAK ICC structure reviewed, we would be glad to help.
This article is for general information only and does not constitute legal or tax advice. It is based on public reports as at October 2026; resolutions, guidance and administrative practice on corporate tax continue to evolve. Please contact TME Legal for advice tailored to your individual situation.
