UAE Corporate Tax: Guide to Private Clarifications
With the introduction of UAE’s Corporate Tax Law (Federal Decree-Law No. 47 of 2022), businesses have started raising so many queries about how the specific provisions be applicable on their unique circumstances. The Federal Tax Authority (FTA) offers a mechanism called Private Clarifications, to provide clarity and ensure compliance for businesses.
This blog give you an idea on what Private Clarifications are, when companies need to ask for them, and how they can help businesses to reduce compliance risk in UAE.
What is a Private Clarification?
A Private Clarification refers to an official written response from FTA addressing a taxpayer’s specific query about the interpretation or application of the UAE tax laws on the specific situations.
It is:
- Tailored – This is focused on the exact situation of the tax payer
- Binding – Applicable on the applicant raising the queries, provided that the facts remain the same.
- Non-public – These clarifications are not automatically published for public use like general guidelines
Why Private Clarifications Matter
Under the complex tax regimes like Corporate Tax and VAT, less noticed areas can lead companies to uncertainty, penalties, and disputes. Private Clarifications give businesses:
- Legal certainty before structuring particular deals or transactions
- Evidence of compliance if questioned during audits
- Reduced litigation risk, as the FTA’s written clarification is strong and binding
- Transparency with stakeholders, such as investors and auditors
Legal Framework
The UAE Corporate Tax Law and related Cabinet Decisions empower the FTA to issue public clarifications. Recent FTA Clarification Guide (July 2025) have formalized the:
- Process of Application
- Documentation requirement
- Binding nature of clarifications
- Circumstances where FTA may refuse to respond
When to Apply for a Private Clarification?
Businesses should consider for requesting a private clarification in the given situations:
1.Uncertainty in the application of Corporate tax provisions
Example: A company in Free zone need to confirm whether their income from overseas services will qualify for 0% corporate tax under Qualifying Freezone Person.
2.Complex restructuring transactions
Example: A group restructured through mergers needs certainty about their tax neutrality under Article 27.
3.Cross-border arrangements
Example: A MNE with foreign branches can asks FTA whether foreign tax credits are available to set off their tax liability under Article 47.
4.VAT scenarios
Example: Whether a mixed supply of goods and services qualifies for a single VAT treatment.
Case Example (Fictional)
Al Bait Holdings Ltd., an entity in Free zone, is planned to restructure its subsidiaries and transfer some assets. The group was unsure on whether the transactions would qualify as a tax-neutral business restructuring under Article 27
Instead of proceeding with restructuring blindly, they applied for a Private Clarification with FTA. The FTA have reviewed their submission, thereby confirmed that they have satisfied the conditions and issued a binding clarification for them.
Outcome:
- The group well executed the restructuring plan without unexpected tax exposure.
- Auditors accepted the FTA’s written clarification as evidence.
- Potential disputes with tax inspectors were also avoided.
How to Apply for a Private Clarification?
The application process for private clarification involves:
1.Preparation of request
- Clearly describe the specific business transaction or issue.
- State the applicable legal provisions in submission.
- Provide required supporting documents such as (contracts, financials, ownership charts etc.).
2.Submit through FTA channels
- Applications should be submitted via the FTA’s electronic portal.
3.FTA review
- After reviewing the application, Authority may request for further information.
- In complex cases, the review by FTA may take more time.
4.Receive a binding written response
Valid only if the facts on which they give this clarification remain unchanged.
Limitations of Private Clarifications
- Only applicable to the concerned applicant – other taxpayers cannot use the particular clarifications.
- The FTA may reject requests for clarification, if the issue is not genuine, lacking sufficient information or documentation, or is already covered by officially published guidelines.
- They cannot be used to override clearly issued statutory provisions.
Benefits of Using Private Clarifications
- Risk management tool – Ensures clear compliance before execution of business structuring
- Supports tax planning – Particularly beneficial for the tax planning of cross-border and Free Zone structures.
- Reduces penalty exposure – Demonstrates good faith compliance.
- Creates audit trail – Documented FTA position can be presented before any regulatory authorities
Best Practices
- Be Specific – Clearly define the facts and legal issue of each circumstances
- Avoid Hypotheticals – Be focus on actual transactions, not on future possibilities.
- Engage Advisors – Work with tax consultants to draft accurate and precise requests.
- Maintain Records – Keep the FTA’s response on each queries as part of corporate documentation.
- Update on Changes – If the facts on which FTA gave the clarification changed, then this may no longer applicable
How Flyingcolour Tax Consultant Can Help?
At Flying Colour Tax Consultant LLC, we assist businesses on:
- Identifying when a Private Clarification is advisable on their specific transactions
- Drafting and submitting applications to FTA with supporting documentation
- Liaising with the FTA during the review process
- Integrating FTA responses into your tax compliance framework
To learn more about UAE Corporate Tax: Understanding the Private Clarifications Process, book a free consultation with one of the Flyingcolour team advisors.
Disclaimer: The information provided in this blog is based on our understanding of current tax laws and regulations. It is intended for general informational purposes only and does not constitute professional tax advice, consultation, or representation. The author and publisher are not responsible for any errors or omissions, or for any actions taken based on the information contained in this blog.