Article 18: The Substance Friction

Navigating Free Zone Tax Eligibility

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.

Arakan Mitigation

The Arakan engine continuously monitors office lease utilization, employee residency metadata, and local OPEX logs to alert the CFO 90 days before a "Substance Gap" becomes a statutory liability.

Mitigate this risk now.

Initialize a non-custodial scan of your entity DNA.