As global businesses reassess their international structures in light of new tax rules worldwide, the UAE has emerged as an attractive hub for regional and global headquarters. The UAE Corporate Tax Law further facilitates this by recognising “Headquarter services to Related Parties” as a Qualifying Activity under the Free Zone Tax Regime offering a potential 0% corporate tax rate when all conditions are met.
For investors and business owners operating group structures across multiple jurisdictions, this activity is central to how a UAE Free Zone entity can legitimately operate as a management and coordination centre for the wider group.
1. What Are “Headquarter Services”?
A Free Zone entity is considered to be providing headquarter services when it administers, oversees, or manages the business activities of related parties whether UAE-based or foreign.
This can include providing:
- Senior and general management
- Strategic decision-making
- Business planning and development
- Risk management
- Group-wide administrative support
- Finance, budgeting and treasury coordination
- Procurement and vendor management
- HR strategy and group hiring
- IT, technical or operational support
- Legal, compliance and governance oversight
- Intellectual property administrative management
In essence, a Free Zone headquarter company acts as the central hub for the group (or for a major segment of the group) driving key decisions and coordinating activities across multiple entities.
2. Which Related Parties Qualify?
For this specific Qualifying Activity, “Related Parties” include:
- Juridical persons (companies)
- Branches of juridical persons
- Foreign permanent establishments
- Domestic permanent establishments
This is a broader scope than many businesses expect, and it allows both UAE and non-UAE group entities to be serviced from a regional or global headquarter in a UAE Free Zone.
3. Examples
A Free Zone entity may fall within this Qualifying Activity if it provides services such as:
Strategic and Management Functions
- Approving budgets and business plans
- Setting sales or marketing strategies
- Deciding on major acquisitions or contracts
- Overseeing group-wide KPIs and performance
Group Service Centre Functions
- Procurement and vendor negotiations
- Shared HR services (recruitment, policies, payroll support)
- Shared IT services or technical support
- Shared finance functions (budgeting, modelling, treasury support)
Risk and Compliance Oversight
- Group-wide compliance and reporting functions
- Legal review and governance support
- Enterprise-level risk management
Other Support
- Centralised training and development
- Standardising processes across the group
- Ensuring operational consistency between subsidiaries
4. Why “Headquarter Services” Are Strategically Important
Establishing a UAE Free Zone entity to act as a group headquarters allows the group to centralise high-value functions in a highly competitive jurisdiction. When the Free Zone company meets all the requirements for the Free Zone Tax Regime, including substance, qualifying income, transfer pricing compliance, de minimis limits, audited financials, it becomes eligible for a 0% corporate tax rate to the income derived from these headquarter services.
This creates a legitimate and internationally recognised framework for:
- Consolidating strategic management functions in the UAE,
- Ensuring proper governance and coordination across global operations, and
- Aligning group structures with a tax-efficient environment, provided transfer pricing regulations are applied correctly.
Many global groups already operate their regional or international headquarters from Dubai or Abu Dhabi for commercial reasons. The Free Zone Tax Regime reinforces the UAE’s attractiveness for this purpose under the new tax landscape.
5. Important Compliance Notes for Headquarter Companies
To qualify for the 0% rate, the Free Zone HQ company must ensure:
- Adequate substance in the Free Zone;
- Proper transfer pricing policies and documentation;
- Charging arm’s length fees to Related Parties;
- Only providing Qualifying Activities or staying within de minimis limits;
- Maintaining audited financial statements; and
- Being incorporated in a recognised Qualifying Free Zone
If any requirement is breached the entity loses Free Zone Tax Regime eligibility for the current year and the next four years. Careful structuring is therefore essential.
6. How Middle East Advisory Group Can Help
We assist businesses with:
- Structuring Free Zone headquarter companies;
- Assessing whether planned HQ activities qualify under the regime;
- Verifying whether a free zone is recognised as a Qualifying Free Zone;
- Designing compliant transfer pricing policies;
- Preparing intercompany agreements;
- Implementing substance and governance frameworks; and
- Navigating the Free Zone Tax Regime and avoiding disqualification
The UAE is one of the world’s most attractive jurisdictions for establishing a headquarters—provided the tax and compliance framework is understood and respected from the outset.