Federal Decree-Law No. 47 of 2022 on the Taxation of Corporations and Businesses marked the introduction of the UAE into the modern environment of taxation in line with international standards.

While most UAE businesses are now covered under a 9% corporate tax rate, the government still grants targeted corporate tax exemptions to foster economic growth and attract investment, protecting the UAE’s image as a friendly business destination.

At German FinTax Consultancy, we guide companies through the complex landscape of corporate tax exemptions—from eligibility assessment to FTA submission—to remain compliant while optimising their tax positions.

This guide consolidates all key Ministerial Decisions and FTA Guidelines relating to exemptions under the UAE Corporate Tax Law and explains their practical implications for UAE-based businesses.

Regulatory Framework Overview

The UAE Corporate Tax exemption regime is anchored in Article 4 of Federal Decree-Law No. 47 of 2022 and further detailed through Ministerial, Cabinet, and FTA Decisions. These legal instruments clarify who qualifies as an exempt person, under what conditions, and how exemption must be applied for and maintained.

Article 4 is the legal cornerstone defining six categories of exempt persons, including government entities, public benefit entities, qualifying investment funds, pension funds, and others determined by the Cabinet.

Key regulations include FTA Decision No. 7 of 2023 (procedures for exemption), Ministerial Decision No. 68 of 2023 (government entities), Ministerial Decision No. 105 of 2023 (continuation or cessation of exemption), Ministerial Decisions No. 115 & 116 of 2023 (pension and participation exemptions), Cabinet Decision No. 37 of 2023 (public benefit entities), and Ministerial Decision No. 302 of 2024 (foreign PE & participation updates).

Together, these form the legal foundation for corporate tax exemption in the UAE.

Ministerial Decision No. 68 of 2023

Treatment of All Businesses and Business Activities Conducted by a Government Entity as a Single Taxable Person

This decision ensures that all business or commercial activities undertaken by a government entity are treated collectively as a single taxable person.

Key Provisions:

• A government entity engaging in multiple business activities must consolidate all such activities under one tax registration.
• Activities not directly related to the government’s sovereign functions (e.g., property leasing, consultancy, or logistics) fall within the scope of corporate tax.
• Government entities can elect to register separate business divisions only with FTA approval.
• This structure prevents fragmentation of government businesses for tax avoidance purposes.

Why It Matters for Private Businesses:

Private businesses that partner with or contract with government entities must determine whether the entity’s business arm is taxable. This affects withholding tax obligations, tax group membership, and related-party transactions.

Actionable Tip:

Before entering joint ventures with a government entity, conduct a Corporate Tax Due Diligence to determine the entity’s taxable status and reporting obligations.

Federal Tax Authority Decision No. 7 of 2023

On Provisions of Exemption from Corporate Tax

This FTA decision outlines the procedures for obtaining an exemption under Article 4 of the Corporate Tax Law.

It supplements Article 4 by setting procedural and documentary requirements for applying to the FTA for exemption. The exemption is effective only from the start of the tax period in which FTA approval is granted and is not retroactive.

Key Provisions:

• The exemption is not automatic—eligible entities must apply to the FTA through the official portal.
• The application must include:
  • Entity’s legal structure, objectives, and source of income
  • Audited financial statements (if applicable)
  • Proof of compliance with exemption criteria (e.g., charitable registration, government ownership)
• The FTA may approve, reject, or revoke exemptions based on compliance.
• Exemption becomes effective from the first day of the tax period in which approval is granted.
• FTA Decision No. 11 of 2023 requires exempt entities to submit annual declarations even after approval.

Who Can Apply:

• Public Benefit Entities (recognised under Cabinet Decision No. 37 of 2023)
• Pension and Social Security Funds (as per Ministerial Decision No. 115 of 2023)
• Wholly-owned government companies
• Foreign government entities and international organisations recognised under UAE treaties

Cross-Reference Tip:

Cabinet Decision No. 37 of 2023 defines who qualifies as a Public Benefit Entity, while FTA Decision No. 7 governs how to obtain exemption. Both must align for successful approval.

Actionable Tip:

Maintain a compliance binder with all supporting documents (MOA, audited reports, registration licenses, ownership proof) to ensure a seamless FTA approval process.

Ministerial Decision No. 105 of 2023

Determination of the Conditions Under Which a Person May Continue or Cease to Be Deemed as an Exempt Person

This decision ensures that entities maintain their exempt status only if they continue to meet all conditions stipulated under the law.

This is particularly relevant for entities undergoing mergers, acquisitions, or liquidation, where exemption continuity depends on timely FTA notification

Key Provisions:

• If an exempt entity undergoes liquidation, restructuring, or temporary failure, it may retain exempt status if:
  • The FTA is notified within 20 business days; and
  • The failure is due to circumstances beyond control, and rectified within 20 days (extendable with FTA approval).
• The FTA has the authority to backdate the removal of exemption if the entity is found to have breached conditions deliberately.
• Exempt status cannot be used for tax avoidance purposes.

Examples:

• A pension fund loses its exempt status if it begins investing in commercial ventures.
• A public benefit entity that starts distributing profits to members ceases to qualify as exempt.

Actionable Tip:

Schedule quarterly exemption reviews to identify potential breaches early and maintain compliance continuity.

Ministerial Decision No. 116 of 2023

Participation Exemption for the Purposes of Corporate Tax

This decision is among the most significant for UAE holding companies and foreign investors. It provides that dividends, capital gains, and other income from “participating interests” are exempt from corporate tax, provided certain conditions are met. It prevents double taxation on profits already taxed abroad, aligning with international standards (OECD guidelines).

Key Provisions:

• Qualifying Ownership:
  The UAE entity must own at least AED 4 million (or equivalent) of shares or capital.
• Minimum Holding Period:
  The interest must be held for 12 consecutive months (or intended to be held).
• Subject-to-Tax Test:
  The foreign subsidiary must be subject to at least 9% tax in its jurisdiction (unless it is a Free Zone or Exempt Person).
• Asset Test:
  No more than 50% of the participation’s assets should consist of non-qualifying assets (e.g., real estate or investments not used in active business).

Additional Points:

• Applies to both domestic and foreign subsidiaries.
• The exemption also covers liquidation proceeds, foreign branch income, and capital gains from sale of shares.
• To claim participation exemption, documentation such as share certificates, investment agreements, and audited financials of the subsidiary should be retained for at least seven years.

Actionable Tip:

Document the intent of long-term ownership and retain evidence of the foreign subsidiary’s tax status to secure the exemption.

Ministerial Decision No. 115 of 2023

Private Pension Funds and Private Social Security Funds

This decision defines the tax exemption framework for private pension and social security funds.

Government-managed pension funds (like GPSSA) are automatically exempt under Article 4(1)(d), whereas private funds must apply under this decision.

Key Provisions:

• The fund must:
  • Be established under UAE law or recognised by the FTA.
  • Maintain separate accounts from the sponsoring company.
  • Be audited annually.
  • Invest only in qualified financial instruments.
• Employer Contributions:
  Contributions up to 15% of total employee remuneration are deductible. The 15% deduction applies to the employer’s taxable income, not to total payroll.
• Income Exemption:
  Investment income, annuities, and returns from fund assets are exempt from corporate tax.

Compliance Requirement:

The fund must submit annual declarations and maintain documentation of member contributions and benefit distributions.

Actionable Tip:

Corporate employers should structure pension schemes within these limits to secure both tax deductions and exemption status for the fund.

FTA Decision No. 11 of 2023

Requirement of Submitting a Declaration for Exempt Persons

Even if exempt, entities are obliged to notify and report to the FTA to maintain transparency.

The FTA has clarified through its FAQs that even exempt entities with no income must file this declaration to maintain active exemption status.

Key Provisions:

• Who Must File:
  All exempt persons under Article 4 (including government entities, public benefit organizations, and pension funds).
• Filing Deadline:
  Within 9 months of the end of each tax period. The declaration must be submitted by the same deadline as the corporate tax return under Article 53.
• Purpose:
  To confirm continuing eligibility and ensure no change in circumstances.

Non-Compliance:

Failure to submit the declaration can result in penalties and potential loss of exempt status.

Note: Non-compliance may trigger administrative penalties under Cabinet Decision No. 75 of 2023.

Actionable Tip:

Include the declaration deadline in your annual tax calendar. German FinTax’s compliance team can automate this process for your business.

FTA Guide CTGEXI1 – Exempt Income: Dividends and Participation Exemption

This guide provides clarity on how dividend and participation income is treated under the UAE Corporate Tax Law. This guide also distinguishes between active vs. passive income, clarifying that management fees and service charges do not qualify as exempt participation income.

Key Highlights:

• Domestic dividends are exempt without conditions.
• Foreign dividends qualify if participation exemption conditions are met.
• Capital gains on disposal of qualifying shares are exempt.
• Income not derived “in the capacity of owner” (e.g., fees, commissions) remains taxable.

Actionable Tip:

Keep proper shareholding documentation, board resolutions, and foreign tax evidence to substantiate exemption claims during FTA audits.

FTA Guide CTGEPF1 – Exempt Persons: Public Benefit, Pension & Social Security Funds

This FTA Guide outlines the qualifying exempt entities and their compliance obligations.

The guide emphasises ongoing audit requirements — entities must maintain and submit annual financial statements to retain their listing under Cabinet Decision 37

Key Points:

• Public Benefit Entities must be listed under Cabinet Decision No. 37 of 2023.
• Wholly-owned subsidiaries of exempt entities can also qualify if their income is used solely for the exempt entity’s purpose.
• Exempt entities are still required to register for Corporate Tax, maintain audited accounts, and file declarations.
• The FTA may revoke exemption if funds are misused.

Actionable Tip:

For charitable or CSR entities, maintain clear segregation of funds and ensure all income serves the approved public benefit objectives.

Ministerial Decision No. 302 of 2024

Participation and Foreign Permanent Establishment Exemption

This updated decision expands and refines the rules from Decision No. 116 of 2023.

It replaces and consolidates earlier provisions on participation exemption, introducing clearer reporting and anti-abuse measures.

Key Updates:

• Clarifies that foreign branch profits may be exempt if the branch’s income is subject to a minimum 9% foreign tax.
• Prevents “double non-taxation” by disallowing the exemption if the income is already exempt in the foreign jurisdiction.
• Introduces a reporting requirement for businesses claiming foreign PE exemptions.
• This update closes a previous loophole where entities could claim exemption for income from low-tax or no-tax jurisdictions without proving foreign tax exposure.

Actionable Tip:

For UAE companies with overseas branches or subsidiaries, perform a tax jurisdiction mapping to validate foreign PE eligibility under this decision.

Cabinet Decision No. 37 of 2023

Qualifying Public Benefit Entities

This decision lists the organisations and foundations officially recognised as Qualifying Public Benefit Entities (QPBE) under UAE law. As of 2025, the Ministry of Finance maintains and periodically updates the QPBE list on its website. Any removal from the list revokes exemption from the start of that tax period.

Eligibility Criteria:

• Must operate exclusively for charitable, cultural, educational, or religious purposes.
• Income and assets must be used solely for public benefit.
• Cannot distribute profits or dividends to members.
• Must submit annual reports and financials to the Ministry of Finance.

Actionable Tip:

Businesses supporting CSR or charitable foundations should ensure their entities align with QPBE conditions to retain exemption and avoid penalties.

Practical Scenarios for UAE Businesses

How German FinTax Consultancy Assists UAE Businesses

At German FinTax Consultancy, we offer end-to-end corporate tax advisory solutions designed specifically for UAE entities.

Our services include:

• Eligibility Review for Exemptions
• FTA Registration and Exemption Application Filing
• Documentation and Declaration Management
• Corporate Structure Optimisation (for participation exemption)
• Ongoing Compliance and Audit Support
• Foreign PE and Group Structuring Advice

We also assist in preparing FTA exemption declarations and handling post-approval compliance reviews to safeguard exempt status.

Our experts ensure your business remains compliant, tax-efficient, and audit-ready under the evolving UAE Corporate Tax regime.

Final Thoughts

The UAE’s Corporate Tax Law combines global transparency with local competitiveness. By understanding and applying the various exemptions, UAE businesses can strategically reduce their tax exposure while maintaining compliance.

With frequent regulatory updates from the Ministry of Finance and FTA, businesses should periodically review exemption eligibility and documentation. Partnering with an experienced firm like German Fintax Consultancy ensures your structure remains compliant, optimised, and aligned with the latest FTA interpretations.