Corporate Tax Exemptions in the UAE: Who Qualifies and How It Works (2026)
The UAE’s corporate tax in the UAE regime applies a 9% rate to most businesses. But the law also provides specific exemptions, preferential rates, and reliefs that can reduce or eliminate your tax liability entirely. The question is not whether exemptions exist. It is whether your business qualifies for one, and what obligations remain if it does.
The most common mistake businesses make is treating four distinct concepts as if they mean the same thing: exempt persons, exempt income, the 0% QFZP rate, and tax reliefs like Small Business Relief. Each has different eligibility conditions, application processes, and compliance consequences. Getting them confused does not just create tax risk. It creates registration and filing risk, too.
Our ACCA-qualified team at AH Chartered Accountants has supported UAE businesses through the Corporate Tax regime since its launch in June 2023, including QFZP compliance reviews, exempt person applications, and SBR elections.
This guide breaks down every exemption category, explains who qualifies, what documentation the Federal Tax Authority requires, and what obligations remain even when you are exempt. Updated for 2026 to reflect Cabinet Decision No. 1 of 2026 (sports entities), Cabinet Decision No. 142 of 2024 (DMTT), and Ministerial Decision No. 229 of 2025 (the current Qualifying Activities framework).
Who is exempt from corporate tax in the UAE?
Under Article 4 of Federal Decree-Law No. 47 of 2022, UAE corporate tax exempts government entities, extractive resource businesses, qualifying public benefit entities, qualifying investment funds, pension funds, and qualifying sports entities (Cabinet Decision No. 1 of 2026). Free Zone companies are not exempt but may qualify for a 0% rate as a QFZP on qualifying income.
Key Data: UAE Corporate Tax Exemptions
| Deadline | Obligation | Applies To | Legal Source | Penalty |
|---|---|---|---|---|
| 31 Mar 2026 | CT registration | Natural persons (turnover >AED 1M in 2025) | FTA Decision 3/2024 | AED 10,000 (waivable under CTP006) |
| 31 Mar 2026 | CT return filing & payment (FY ending 30 Jun 2025) | All taxable persons with June FY-end | FDL 47/2022 | AED 500/mo (1–12), then AED 1,000/mo + 14% interest |
| 14 Apr 2026 | New penalty framework takes effect | All taxable persons | Cabinet Decision 129/2025 | Revised penalty matrix aligned with VAT |
| Within 3 months of incorporation | CT registration | Businesses incorporated in 2026 | FTA Decision 3/2024 | AED 10,000 |
| 1 Jul 2026 | eInvoicing pilot begins | All businesses (awareness) | Ministry of Finance | N/A (preparation phase) |
| 31 Jul 2026 | Appoint ASP for eInvoicing | Revenue ≥AED 50M | Cabinet Decision 106/2025 | TBC |
| 30 Sep 2026 | CT return filing & payment (FY ending 31 Dec 2025) | All taxable persons with calendar year | FDL 47/2022 | AED 500/mo + 14% annual interest |
| 31 Dec 2026 | CT return filing & payment (FY ending 31 Mar 2026) | All taxable persons with March FY-end | FDL 47/2022 | AED 500/mo + 14% annual interest |
| Ongoing (within 20 business days) | Update tax records with FTA after any business change | All registered taxable persons | Tax Procedures Law | AED 10,000 (first); AED 20,000 (repeat within 24 months) |
Table of Contents
Understanding the 4 Types of UAE Corporate Tax Exemptions
| Topic | Key Data | Legal Source |
|---|---|---|
| Standard Corporate Tax rate | 9% on taxable profits above AED 375,000 | Federal Decree-Law No. 47 of 2022, Art. 3 |
| 0% rate band | Profits up to AED 375,000 | Federal Decree-Law No. 47 of 2022, Art. 3 |
| Small Business Relief threshold | Revenue ≤ AED 3,000,000 per tax period | Ministerial Decision No. 73 of 2023 |
| SBR availability window | Tax periods ending on or before 31 December 2026 | Ministerial Decision No. 73 of 2023 |
| QFZP de minimis (non-qualifying) | Lower of 5% of total revenue or AED 5,000,000 | Cabinet Decision No. 100 of 2023; Ministerial Decision No. 229 of 2025 |
| QFZP status loss period (if breached) | 5 consecutive tax periods | Cabinet Decision No. 100 of 2023 |
| Participation exemption (minimum holding) | 5% ownership for 12+ continuous months | Federal Decree-Law No. 47 of 2022, Art. 23 |
| DMTT effective rate (large MNEs) | 15% minimum effective tax rate | Federal Decree-Law No. 60 of 2023; Cabinet Decision No. 142 of 2024 |
| DMTT consolidated revenue threshold | EUR 750,000,000 (≈ AED 3 billion) in 2 of last 4 fiscal years | Cabinet Decision No. 142 of 2024 |
| Sports entity exemption application deadline | 60 business days from end of qualifying tax period | Cabinet Decision No. 1 of 2026 |
| Annual declaration filing window | 9 months from end of relevant tax period | Cabinet Decision No. 1 of 2026; FTA general rules |
| Failure to register penalty | AED 10,000 | Cabinet Decision No. 75 of 2023 |
Key takeaway: “Exempt” does not mean “no obligations.” Every category above still requires some form of registration, filing, or documentation. Failure to comply triggers corporate tax penalties starting at AED 10,000. This classification is referenced and explained in detail across the sections below, with the precise legal source for each category.
Who Are Exempt Persons Under UAE Corporate Tax Law?
Article 4 of the Corporate Tax Law defines the categories of persons that are fully excluded from the tax. “Fully excluded” means all of their income is outside the scope of corporate tax. But even exempt persons have compliance obligations. Here is each category:
Government Entities
Federal and local government bodies, ministries, departments, authorities, and public institutions are automatically exempt on sovereign functions. However, if a government entity operates a licensed commercial activity competing in the private market, that activity is taxed at 9%. Government entities may apply to have all commercial activities consolidated as a single Taxable Person.
Government-Controlled Entities
Entities listed by Cabinet Decision that are wholly owned and controlled (directly or indirectly) by a government entity. They must be engaged in a mandated activity and not operate commercial activities outside the approved list. Listed in Cabinet Decision No. 37 of 2023 (as amended).
Extractive and Non-Extractive Natural Resource Businesses
Oil, gas, and mineral extraction businesses subject to Emirate-level taxation are exempt from federal corporate tax to avoid double taxation. Non-extractive natural resource businesses (water, fisheries) are also exempt if they meet specific conditions under the CT Law.
Qualifying Public Benefit Entities (QPBEs)
Charities, religious organisations, cultural foundations, and educational institutions. They must be listed in a Cabinet Decision, operate for public benefit, not distribute profits to founders or shareholders, and maintain proper governance. Donations to listed QPBEs are deductible for the donor.
Qualifying Investment Funds
Investment funds (including REITs) that meet these conditions: regulated by a competent authority, diversified investments, subject to investment restrictions, and managed externally (not self-managed). The exemption eliminates double taxation at both fund and investor level. Investors are taxed on distributions, not at the fund level. This is particularly relevant for the growing REIT market in Abu Dhabi and Dubai.
Public and Private Pension / Social Security Funds
Must apply to the FTA for exempt status. Public pension funds are generally approved. Private funds must demonstrate they meet the qualifying conditions under the CT Law.
Wholly-Owned Subsidiaries of Exempt Persons
Subsidiaries that are wholly owned and controlled by a qualifying exempt person may also apply for exemption. Approval is at the FTA’s discretion and requires ownership and control documentation.
Qualifying Sports Entities (Cabinet Decision No. 1 of 2026)
Cabinet Decision No. 1 of 2026 was issued 12 January 2026 and announced by the Ministry of Finance on 9 February 2026. It applies retroactively from 1 June 2023, aligning with the start of the Corporate Tax regime. The exemption covers three entity types operating in the UAE under Federal Law No. 4 of 2023 on Sports:
- International Sports Entities recognised by the Ministry of Sports or a Competent Authority.
- Sports Entities wholly owned and controlled (directly or indirectly) by an International Sports Entity.
- Supporting Entities wholly owned and controlled by an International Sports Entity and established exclusively to carry out supporting activities.
The conditions are strict. The entity must operate on a non-commercial basis, must use all income and assets exclusively to further its sporting purpose (no private benefit to founders, shareholders, or trustees), and must obtain Corporate Tax registration before applying for the exemption.
Two operational deadlines matter:
- Application: Eligible entities must apply to the FTA within 60 business days from the end of the tax period in which they meet the exemption conditions.
- Annual declaration: Once approved, the entity must submit an annual declaration to the FTA within 9 months from the end of each relevant tax period confirming continued eligibility.
This is not a broad sectoral exemption. It is tied to regulatory oversight, ownership structure, and substance requirements. Sports organisations that filed FY2024 returns before this Decision was published should review their position and consider amended filings given the retroactive application.
What Income Is Exempt from UAE Corporate Tax?
This is the distinction that catches people: the entity is still taxable. Specific income streams are excluded from the taxable income calculation, but the entity must still register, file, and report that income on the return.
Qualifying Dividends (Participation Exemption)
Dividends received from UAE or foreign companies are exempt if the receiving company holds at least 5% ownership for a continuous period of 12 months or more. This prevents economic double taxation of corporate profits already taxed at the subsidiary level.
Qualifying Capital Gains
Capital gains from the disposal of shares in a subsidiary are exempt under the same participation exemption conditions: 5% ownership, held for 12 months or more.
Qualifying Foreign Branch Income
Income from a foreign branch may be exempt if the branch is subject to tax at 9% or higher in the foreign jurisdiction. This is an election made on the corporate tax return, not an automatic exemption.
Intra-Group Transfers (Qualifying Group Relief)
Transfers of assets or liabilities between members of a qualifying group (75% common ownership) can be made at net book value, deferring any gain or loss. There is a two-year clawback period. Neither entity can be an Exempt Person or QFZP.
Business Restructuring Relief
Mergers, spin-offs, and other corporate restructurings where a business or independent part is transferred in exchange for shares. Both entities must be UAE resident persons or have a PE in the UAE. Two-year clawback applies.
Important: Exempt income must still be reported on your corporate tax return. It is subtracted from taxable income during the corporate tax calculation process, but the obligation to report it remains. Omitting exempt income from the return invites FTA scrutiny.
Free Zone Companies: The 0% Rate Is Not an Exemption
Free Zone companies are not exempt from corporate tax. They are taxable persons who may qualify for a 0% rate on qualifying income. This is a preferential rate subject to strict conditions, not an exemption. The distinction matters because it determines your registration, filing, and compliance obligations.
The 5 QFZP Conditions (All Must Be Met)
To qualify as a QFZP, a Free Zone entity must meet all five of the following conditions continuously throughout the tax period. The framework was updated in 2025 and the current operative decisions are listed against each condition:
- Be a Free Zone Person: a juridical person incorporated, established, or otherwise registered in a UAE Free Zone, including branches (Article 18, Federal Decree-Law No. 47 of 2022).
- Maintain adequate substance in the Free Zone: sufficient employees, operating expenditure, and physical assets within the Free Zone to undertake the core income-generating activities (Article 18, FDL 47/2022).
- Derive qualifying income as defined by Cabinet Decision No. 100 of 2023 (qualifying income definitions) and Ministerial Decision No. 229 of 2025 (qualifying activities and excluded activities). Ministerial Decision No. 229 of 2025 was issued on 28 August 2025 and applies retroactively from 1 June 2023. It repeals and replaces the earlier Ministerial Decision No. 265 of 2023.
- Not elect to be treated as subject to standard Corporate Tax: the election is irrevocable for five consecutive tax periods once made.
- Comply with transfer pricing rules (Articles 34-55, CT Law) and Ministerial Decision No. 97 of 2023, and prepare audited financial statements in accordance with Ministerial Decision No. 84 of 2025, applicable to tax periods commencing on or after 1 January 2025.
If your last QFZP review was in 2023 or early 2024, your compliance position should be reassessed against this updated framework before the next filing deadline.
The De Minimis Test
Non-qualifying revenue must not exceed 5% of total revenue or AED 5 million, whichever is lower. If breached, QFZP status is lost for five consecutive tax periods. All income during those five years is taxed at 9%. That is not a one-year correction. It is a five-year penalty.
Filing Obligation
QFZPs must file a corporate tax return to maintain their status. Missing a corporate tax filing deadline risks loss of the 0% rate, which is a far more expensive consequence than the filing penalty itself.
DMTT Override for Large MNEs
Since 1 January 2025, large multinational enterprises with consolidated global revenue of EUR 750 million or more (in at least two of the four preceding fiscal years) are subject to the Domestic Minimum Top-Up Tax (DMTT).
The framework was introduced by Federal Decree-Law No. 60 of 2023 (amending FDL 47/2022) and operationalised by Cabinet Decision No. 142 of 2024 with detailed DMTT Rules. It ensures a minimum effective tax rate of 15% on UAE profits, applying as a top-up over the standard 9% Corporate Tax. For in-scope MNEs, the QFZP 0% rate does not shield against this top-up. The DMTT return is due 15 months from the end of the fiscal year (18 months for the first year).
Corporate Tax Reliefs Available to UAE Businesses
Reliefs are not exemptions. They reduce or defer your tax liability under specific conditions, but you remain a taxable person with full registration and filing obligations.
Small Business Relief (SBR)
Revenue of AED 3 million or less in the relevant tax period? You can elect to treat your taxable income as zero. But it must be actively elected on the return. It is not automatic. Available for tax periods ending on or before 31 December 2026. You cannot be a QFZP, Tax Group member, or MNE group member. And there is a trade-off: if you elect SBR, you cannot accrue, utilise, or transfer tax losses for that period, nor carry forward net interest expenditure. Full details on our Small Business Relief page.
Tax Group Relief
Parent must own 95% or more of voting rights and share capital of subsidiaries. The Tax Group files one consolidated return, and losses can transfer between members. All members must follow the same financial year. Neither parent nor subsidiary can be an Exempt Person or QFZP. This is particularly relevant for corporate groups with some entities in Free Zones and others on the mainland. The Free Zone entity’s QFZP status disqualifies it from joining the Tax Group, so the group structure must be designed with this limitation in mind from the start.
Tax Loss Carry-Forward
Losses carry forward indefinitely but can only offset up to 75% of taxable income in any future period. No carry-back is allowed. Losses must be documented and reported on each return. If you did not declare a loss in the period it occurred, you may lose the ability to claim it later.
5 Common Mistakes Businesses Make About Corporate Tax Exemptions
Mistake 1: “My Free Zone company is exempt from corporate tax”
It is not. Free Zone companies are taxable persons. They may qualify for a 0% rate as a QFZP on qualifying income, but only if all five conditions are met continuously. Non-qualifying income is taxed at 9%. Calling it an “exemption” leads to skipped registrations, missed filings, and penalties.
Mistake 2: “I’m exempt, so I don’t need to register or file”
Most exempt persons must still register for corporate tax and file an annual declaration. Failure to register triggers AED 10,000. Failure to file triggers separate penalties. Exemption from tax does not mean exemption from the system.
Mistake 3: “Revenue under AED 375,000 means I’m exempt”
The AED 375,000 threshold is the 0% rate band, not an exemption. You are still a taxable person. You must still register. You must still file a return. Your tax payable is simply AED 0 for that band. But you are inside the corporate tax system, not outside it.
Mistake 4: “Small Business Relief applies automatically”
SBR must be actively elected on your corporate tax return. If you qualify but do not tick the box, you are assessed at standard rates. And by electing SBR, you forfeit the ability to carry forward tax losses for that period. It is a deliberate choice with trade-offs, not a default setting.
Mistake 5: “Exempt income doesn’t need to be reported”
Exempt income (dividends, capital gains from qualifying shareholdings) must be disclosed on your tax return. It is excluded from taxable income during calculation, but the reporting obligation remains. Omitting it invites FTA queries and undermines your credibility during any future review.
If you are unsure about your exemption status, consult a tax consultant in Abu Dhabi before your next filing deadline. The cost of a professional review is a fraction of the cost of getting the classification wrong.
How to Apply for Corporate Tax Exemption with the FTA
The application process depends on the category. Some entities are exempt automatically. Others must apply through the FTA with supporting documentation.
Automatically Exempt (No Application Needed)
Government entities (federal and local) and extractive natural resource businesses subject to Emirate-level taxation. Their exempt status exists by operation of law.
Application Required (Via FTA)
- Qualifying Public Benefit Entities: apply through the relevant local or federal government entity, then listed by Cabinet Decision.
- Qualifying Investment Funds: apply to FTA with regulatory documentation, investment policy, and management structure evidence.
- Public/Private Pension Funds: apply to FTA with fund documentation and social security mandate evidence.
- Wholly-Owned Subsidiaries of Exempt Persons: apply to FTA with ownership and control documentation.
- Qualifying Sports Entities: register for Corporate Tax first, then apply to the FTA within 60 business days from the end of the qualifying tax period. Required: Ministry of Sports recognition documentation, ownership and control structure proof, non-distribution governance evidence, and audited financial statements demonstrating non-commercial operation.
Required Documentation (General)
Trade licence or incorporation certificate. Ownership and control structure documentation. Proof of qualifying activity (regulatory licence, Cabinet Decision listing). Financial statements demonstrating income is within exempt scope. Ongoing compliance: annual declarations to the FTA confirming conditions are still met.
Key point: Exemption status can be revoked if conditions change or are breached. Annual compliance monitoring is essential. Professional accounting services that maintain proper records ensure your exempt status remains defensible year after year.
Not Sure If Your Business Qualifies for a Corporate Tax Exemption?
The difference between “exempt”, “0% rate”, and “taxable at AED 0” has real consequences for your registration, filing, and compliance obligations. Our ACCA-qualified team assesses your eligibility, handles the application, and ensures your status is maintained.
Frequently Asked Questions About UAE Corporate Tax Exemptions
Related Services
About the Author
Ameer Hamza (Managing Partner | AH Chartered Accountants)
ACCA | CFA Level I | Certified Financial Modeler (CFM)
Ameer Hamza (ACCA) is the Managing Partner at AH Chartered Accountants. With 7+ years of expertise advising over 50 UAE businesses, he specializes in statutory audits, corporate tax strategy, and corporate financial modeling. Ameer authors our technical content to ensure business leaders receive precise, FTA-compliant guidance directly from an active industry expert.
Book a consultation
if you’d like to talk to our consulting team, contact us via the form and we’ll get back to you shortly.
Our Address
Abu Dhabi Mall - Al Zahiyah - Abu Dhabi UAE