Sector: Taxes

Who is Exempt from Corporate Tax in the UAE?

11 April 2026

With Corporate Tax now in force in the UAE, the first question on the minds of business owners and entities is: am I subject to the tax, or exempt from it? The answer is not the same for everyone. The UAE legislator designated specific categories that it exempted from Corporate Tax, but this exemption is conditional in many cases, is not automatic for all, and may lapse if one of its conditions is breached. Understanding where your entity stands among these categories is the difference between a tax obligation managed with confidence and a costly surprise. Below, we explain the categories of persons exempt from Corporate Tax and their conditions, based on the text of Federal Decree-Law No. (47) of 2022 on the Taxation of Corporations and Businesses.

Who Is Exempt from Corporate Tax in the UAE? And What Are the Conditions of Exemption?

First: Who Is an “Exempt Person”? An Overview of the Exemption Categories

The Decree-Law defined an “Exempt Person” as a person exempt from Corporate Tax under its provisions. Article (4) enumerated the categories exempt from Corporate Tax as follows:

Government Entity

Government Controlled Entity

Person Conducting Extractive Business

Person Conducting Non-Extractive Natural Resource Business

Qualifying Public Benefit Entity

Qualifying Investment Fund

Pension and Social Security Funds Subject to Regulatory Oversight

Juridical Person Wholly Owned by an Exempt Person

The Decree-Law also allowed any other person to be designated as exempt by a decision issued by the Cabinet upon the suggestion of the Minister.

Exemption Is Not Automatic for Everyone

Some categories are exempt by operation of law, while others — namely the Qualifying Public Benefit Entity, the Qualifying Investment Fund, the pension and social security funds, and the juridical person wholly owned by an Exempt Person — must submit an application to the Federal Tax Authority to be exempted, in accordance with the forms, procedures, and timeline set by the Authority. Knowing which category your entity falls into, and whether it needs an application or not, is a crucial step that leaves no room for error.

Second: The Government Entity

The Decree-Law exempted the Government Entity from Corporate Tax, and its provisions do not apply to it. This exemption, however, is not absolute; if the Government Entity conducts a business or business activity under a license issued by a Licensing Authority, that business becomes subject to the provisions of the Decree-Law and is treated as an independent business. The Government Entity must keep financial statements for it separate from its other activities, and calculate the taxable income for it independently for each tax period. Transactions between that business and its other activities are treated as related-party transactions. The Government Entity may apply to the Authority to treat all its businesses and activities as a single taxable person, provided the conditions set by the Minister are met.

Third: The Government Controlled Entity

The Government Controlled Entity was likewise exempted from Corporate Tax, and the provisions of the Decree-Law do not apply to it. By way of exception, it becomes subject to its provisions if it conducts a business or business activity that is not part of its mandated activities. Such business is treated as an independent business, with the obligation to keep financial statements for it separate from its mandated activity, to calculate its taxable income independently for each tax period, and to treat the transactions between it and its other activities as related-party transactions.

⚠ The Exemption May Lapse in Part

Even Government Entities and Government Controlled Entities may fall within the scope of the tax to the extent of their licensed or non-mandated business. The mere fact that an entity is “governmental” therefore does not mean a blanket exemption for every activity it conducts; rather, those businesses must be separated in the accounts and treated under the provisions of the Decree-Law.

Fourth: Extractive Business

A person is exempt from Corporate Tax when conducting activities related to Extractive Business — being the business related to exploring, extracting, or removing the State's Natural Resources — where it meets all of the following conditions:

It holds, directly or indirectly, an interest in a right, concession, or license issued by a Local Government to undertake its Extractive Business.

It is effectively subject to tax under the legislation in force in the relevant Emirate.

It submits a notification to the Ministry, in the form and manner agreed with the Local Government.

If such a person earns income from other business falling within the scope of the Decree-Law, that other income is subject to its provisions, unless that business meets the conditions for the exemption of Non-Extractive Natural Resource Business. The other business is not considered to produce taxable income if it is ancillary or incidental to the Extractive Business and its revenue in the tax period did not exceed five percent of the person's total revenue in that same period. This exemption also does not apply to contractors, subcontractors, suppliers, or any other person who does not, in their own right, meet the conditions for exemption.

Fifth: Non-Extractive Natural Resource Business

A person is exempt from Corporate Tax when conducting activities related to Non-Extractive Natural Resource Business — such as separating, treating, refining, storing, transporting, marketing, or distributing them — where it meets all of the following conditions:

It holds, directly or indirectly, an interest in a right, concession, or license issued by a Local Government to undertake such business in the State.

Its income from such business is derived solely from persons who undertake a business or business activity.

It is effectively subject to tax under the legislation in force in the relevant Emirate.

It submits a notification to the Ministry, in the form and manner agreed with the Local Government.

The same five-percent rule applies here to ancillary or incidental other business, and the exemption likewise does not extend to contractors, subcontractors, suppliers, or those in their position who do not meet the conditions.

Sixth: The Qualifying Public Benefit Entity

The Qualifying Public Benefit Entity is exempt from Corporate Tax where all of the following conditions are met:

It is established and operated exclusively for religious, charitable, scientific, artistic, cultural, sporting, educational, healthcare, environmental, humanitarian, animal-protection, or other similar purposes; or it is a professional body, chamber of commerce, or similar entity operating exclusively to promote social welfare or public benefit.

It does not conduct a business or business activity, except for activities that relate or are directly aimed at fulfilling the purposes for which it was established.

Its income or assets are used exclusively to serve the purpose for which it was established, or to pay any necessary and reasonable expenditure incurred for related purposes.

No part of its income or assets is paid out or otherwise made available for the personal benefit of any shareholder, member, trustee, founder, or beneficiary that is not itself another Qualifying Public Benefit Entity, Government Entity, or Government Controlled Entity.

In addition to any other conditions set by a Cabinet decision. The exemption applies from the beginning of the tax period in which the entity is listed within the Cabinet decision, or from any other date determined by the Minister. The Authority may request any relevant information or records to monitor the entity's continued compliance with the conditions.

Seventh: The Qualifying Investment Fund

An Investment Fund may apply to the Authority to be exempted from Corporate Tax as a Qualifying Investment Fund, where all of the following conditions are met:

The Investment Fund or its manager is subject to regulatory oversight by a competent authority in the State, or by a competent foreign authority recognised for the purposes of this article.

Interests in the Fund are traded on a Recognised Stock Exchange, or are marketed and made available sufficiently widely to investors.

The main or principal purpose of the Fund is not to avoid Corporate Tax.

In addition to any other conditions set by a Cabinet decision. The Authority may request any relevant information or records to monitor the Fund's continued compliance with the conditions.

Eighth: Pension and Social Security Funds

The Decree-Law exempted public pension or social security funds, as well as private pension or social security funds that are subject to regulatory oversight by the competent authority in the State and that meet any further conditions the Minister may set. This category is among those that must submit an application to the Authority to obtain the exemption.

The Exemption Is Conditioned on the Conditions Persisting

If a person fails to meet one of the conditions at any time during the tax period, it ceases to be regarded as exempt from the beginning of that period. Nevertheless, the Decree-Law permitted the Minister — in defined cases, such as where the failure results from the liquidation or termination of the person, or is of a temporary nature corrected without delay with appropriate monitoring measures in place — to allow the person to continue to be regarded as exempt, or to be regarded as not exempt from a different date. It is precisely here that the value of careful legal follow-up to preserve exempt status comes to the fore.

Frequently Asked Questions

Must I apply to obtain the exemption, or is it automatic?

That depends on your category. Some categories are exempt by operation of law, while the Qualifying Public Benefit Entity, the Qualifying Investment Fund, the pension funds, and the juridical person wholly owned by an Exempt Person must submit an application to the Authority. Determining your category and your exemption path precisely is what we assist you with through a specialized consultation.

What is the Corporate Tax rate if I am not exempt?

The Decree-Law imposed the tax at zero percent on the portion of taxable income not exceeding an amount set by a Cabinet decision, and at nine percent on the amount exceeding it. There are details that bear on your specific situation. Contact us to assess your tax position precisely.

Is my Free Zone company exempt?

The Decree-Law addressed the “Qualifying Free Zone Person” and subjected its Qualifying Income to zero percent under precise conditions, including maintaining adequate substance in the State and earning the Qualifying Income determined by a Cabinet decision. This assessment is detailed and differs from case to case; we recommend contacting us before taking any decision.

What is Small Business Relief?

The Decree-Law allowed a Resident taxable person to elect to be treated as not having derived any taxable income for the tax period if its revenue did not exceed a threshold set by the Minister, subject to further conditions. This relief has a significant impact on your obligations. Contact us to find out whether it applies to you.

If I am exempt, must I still register for Corporate Tax?

The Decree-Law required the taxable person to register with the Authority and obtain a Tax Registration Number. It also allowed the Authority to require certain exempt categories — such as the Qualifying Public Benefit Entity, the Qualifying Investment Fund, the pension funds, and the juridical person wholly owned by an Exempt Person — to register and obtain a registration number. Registration may therefore be required despite the exemption; contact us to confirm.

What is the fifteen-percent Top-up Tax?

The Decree-Law provided that the Cabinet would issue a decision regulating the imposition of a Top-up Tax on multinational enterprises, so that the total effective tax rate imposed on them is fifteen percent. This concerns a specific category of large entities. If your entity is part of a multinational group, contact us to assess its impact on you.

Can my group of companies form a single “Tax Group”?

The Decree-Law allowed a Resident person (the parent company) to apply to the Authority to form a Tax Group with subsidiaries, subject to conditions including an ownership ratio of no less than ninety-five percent and further requirements. Forming the group has significant effects on calculation and compliance. Contact us to study its feasibility for your group.

When did Corporate Tax take effect?

The Decree-Law applies to tax periods beginning on or after 1 June 2023. Determining your tax period and the timing of your obligations precisely is essential; we are glad to assist you with that.

What is the difference between a Resident and a Non-Resident Person for tax purposes?

The Decree-Law distinguished between a Resident and a Non-Resident Person, attaching to each a different scope of taxation, and addressed the concepts of Permanent Establishment and State-sourced income. Determining your status and the scope of your taxation requires examining your circumstances. Contact us to determine your position precisely.

Are dividends and participation interests exempt?

The Decree-Law included provisions on Exempt Income and the Participation Exemption, under which certain categories of dividends, profit distributions, and income derived from Participating Interests are exempt subject to conditions — including an ownership ratio of no less than five percent, a holding period of no less than twelve months, and further conditions. Whether this applies to your situation requires study. Contact us to assess it.

Legal References

Federal Decree-Law No. (47) of 2022 on the Taxation of Corporations and Businesses, issued on 3 October 2022, effective fifteen days from the date of its publication, and applicable to tax periods beginning on or after 1 June 2023.
Corporate Tax Frequently Asked Questions — Federal Tax Authority: https://tax.gov.ae/en/taxes/corporate.tax/faqs.aspx

⚖ SPECIALIZED LEGAL CONSULTATION

Is your entity exempt from Corporate Tax? Make sure before it is too late.

The team at AWADH ALMHEIRI LAW FIRM AND LEGAL CONSULTATIONS is ready to determine your entity's place among the exemption categories and to follow your tax obligations with confidence.

✓Determining your tax category precisely, and whether you are exempt by law or need to file an application with the Authority.

✓Preparing exemption and registration applications and following them up before the Federal Tax Authority.

✓Reviewing the conditions of the exemption and their persistence, and protecting your entity's status from lapse of exemption.

✓Assessing the position of Free Zones, Small Businesses, and Tax Groups according to your entity's circumstances.

Contact AWADH ALMHEIRI LAW FIRM AND LEGAL CONSULTATIONS to book your legal consultation today.

Disclaimer: This blog was prepared by AWADH ALMHEIRI LAW FIRM AND LEGAL CONSULTATIONS for general legal-awareness purposes only. It does not constitute legal advice or a legal opinion on any specific matter, and it does not create an attorney-client relationship. Rulings differ according to the circumstances of each case, and it is advisable to obtain specialized legal consultation before taking any action.

This English text is a translation. In the event of any discrepancy, the Arabic version shall be the authoritative reference.

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