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09/01/2026
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The introduction of corporate tax in the UAE, which commenced for financial years starting on or after June 1, 2023, represents a significant milestone in the nation's economic evolution. While most businesses are now subject to the UAE tax regime, the UAE government has introduced a variety of corporate tax exemptions and tax relief measures.
These provisions are designed to ensure that the new federal corporate tax does not stifle growth in strategic sectors or place an undue burden on small enterprises. This guide provides a detailed look at the UAE CT regime, the corporate tax rate, and how to remain in compliance with UAE regulations.
A corporate tax exemption in the UAE is a legislative exclusion where certain income or assets are not subject to tax. This form of direct tax is governed by Federal Decree-Law No. 47 of 2022 (and subsequent amendments). Under the UAE corporate tax law, the standard corporate tax rate is 9% on tax on income exceeding AED 375,000. However, many entities are exempted from the corporate tax or can apply for a 0% rate.
A corporate tax exemption in the UAE is a legal exclusion where certain income or assets are not subject to corporate tax. While many entities may qualify for exemptions, they must still register for corporate tax with the Federal Tax Authority (FTA) to confirm their status.
Small businesses and startups benefit from a 0% rate on taxable income up to AED 375,000. Corporate tax applies only to the portion of profit exceeding this limit.
Small Business Relief (SBR): Under Article 21, resident persons with revenue below AED 3 million can elect to be treated as having no taxable income for tax periods ending on or before December 31, 2026.
UAE government entities (federal or local) and government-controlled entities are generally exempt from UAE corporate tax. However, if they engage in a "Mandated Activity" under a commercial UAE business license that competes with the private sector, that specific income may be subject to corporate tax.
Businesses involved in the extraction of UAE natural resources (oil and gas) or related non-extractive activities are eligible for exemption from corporate tax at the federal level because they are typically subject to emirates-level corporate tax.
Compliance: To be exempt from UAE federal tax, these businesses must notify the UAE Ministry of Finance and meet conditions under Article 7 or Article 8 of the law.
Organizations such as charities, religious groups, and educational institutions are eligible for corporate tax exemptions if they are listed in a Cabinet Decision as a Qualifying Public Benefit Entity. Qualifying Investment Funds can also apply for exemption to ensure the UAE remains a hub for global capital.
The UAE maintains its commitment to the free zone ecosystem by offering a 0% rate on Qualifying Income.
To be a Qualifying Free Zone Person (QFZP) and be exempt from UAE corporate tax on specific revenues, an entity must:
Maintain adequate economic substance (staff and assets) in the UAE.
Derive income from Qualifying Activities (e.g., manufacturing, logistics, or treasury services).
Not have elected to be subject to the standard 9% tax.
Comply with Article 55 regarding transfer pricing and arm’s length principles.
Note: Income from Excluded Activities (like banking or certain real estate transactions) remains subject to the 9% rate.
For a business to qualify for corporate tax exemptions in the UAE, it must meet specific criteria based on its nature and activities. Here are some essential conditions for qualification:
Type of Business Activity: The nature of your business plays a significant role in determining whether you qualify for tax exemptions. Industries such as education, healthcare, and public services are more likely to qualify for full or partial exemptions.
Income Level: Small businesses with earnings under AED 375,000 are automatically exempt from corporate tax. It’s important for businesses to track their earnings to ensure they remain below this threshold.
License and Concession Requirements: For certain industries like extractive businesses, companies must hold a valid government-issued concession or license that grants them the right to operate in specific sectors.
Non-Profit or Public Benefit Purpose: Non-profit organizations that operate exclusively for public benefit purposes—such as charities, religious organizations, and educational institutions—are typically exempt from corporate tax. However, they must not engage in unrelated commercial activities.
Corporate tax exemptions offer several key advantages for businesses in the UAE, including:
Support for Small Businesses: The tax exemption for businesses earning less than AED 375,000 helps promote entrepreneurship and supports startups in their early stages.
Encouraging Foreign Investment: The exemptions for free zone companies and investment funds make the UAE a more attractive destination for international investors looking for tax-efficient opportunities.
Incentivizing Strategic Sectors: By exempting industries like renewable energy, education, and healthcare, the UAE government is encouraging growth in these key sectors that contribute to the country’s long-term economic diversification.
Non-Profit Sector Growth: Exemptions for non-profit organizations help charities, religious institutions, and educational organizations expand their impact without worrying about tax burdens.
Applying for a corporate tax exemption in UAE is a structured process managed through the Federal Tax Authority (FTA) online portal, EmaraTax. To begin, every entity—even those eligible for an exemption—must first register for corporate tax to obtain a Tax Registration Number (TRN). Once registered, certain categories like Qualifying Investment Funds or Public Pension Funds must submit a formal application for exemption within 60 business days from the end of their tax period. For other entities like Qualifying Public Benefit Entities, the status is contingent on being listed in a Cabinet Decision. This formal approval process is a cornerstone of the UAE's tax system, ensuring that businesses maintain transparency while effectively managing their tax liability.
Even if you believe your business is eligible for exemptions, you are likely required to register for corporate tax.
Registration Deadline: New entities must register within three months of incorporation. Existing entities must follow the timelines set by the Federal Tax Authority.
Tax Period: Most businesses align their tax period with their Gregorian calendar year or financial year.
Documentation: Failure to maintain audited financial statements or transfer pricing records can lead to exemptions are not applicable for your business, reverting you to the 9% rate.
The implementation of corporate tax in the UAE has reshaped the financial landscape for every entity operating in the UAE. While the new corporate tax regime sets a standard rate of 9%, many organizations are eligible for UAE corporate tax relief or a full corporate tax exemption in the UAE. Under Article 9 of the UAE Corporate Tax Law, entities such as charities and healthcare providers can be classified as Qualifying Public Benefit Entities, provided they are established for social welfare and listed in a formal decision made by UAE authorities. Other businesses, such as those in the extractive sector, are not subject to corporate tax unless they engage in non-exempt commercial activities. For tax purposes, the law distinguishes between "Exempt Persons" and those who must pay corporate tax UAE on profits exceeding AED 375,000. Ultimately, businesses must review their specific services in the UAE to confirm if they qualify for exemptions if they meet specific regulatory conditions.
To qualify for corporate tax exemptions, businesses must maintain proper financial records and documentation. This includes keeping track of income levels, business activities, and ensuring that all relevant licenses and permits are up to date. Failing to do so could result in a denial of the exemption.
Some businesses mistakenly assume they qualify for an exemption based on general tax laws. It’s crucial to understand the specific criteria that apply to each exemption type. For example, businesses in free zones must ensure they meet the requirements related to operational substance and activity, or they may lose their exemption status.
Certain tax exemptions, such as those for extractive businesses or non-extractive natural resources, require businesses to notify the Ministry of Finance or the relevant local authorities. Failure to do so can result in penalties or the loss of exemption status.
Navigating the complexities of corporate tax in the UAE can be challenging, especially with the recent changes in corporate tax regulations. At Young & Right, our certified corporate tax consultants specialize in helping businesses understand their eligibility for corporate tax exemptions in the UAE.
We guide businesses in determining whether they are exempt from paying corporate tax or subject to the tax based on UAE tax laws and cabinet decisions. Our team ensures that your business complies with the necessary tax compliance requirements and helps you understand if you need to register for corporate tax under Article 9 or Article 10 of the UAE corporate tax law.
Whether you're in a free zone or a government-controlled entity, we offer tailored services to ensure your business maximizes the benefits of exempt income and remains compliant with all corporate taxation rules.
Let us help you navigate the corporate tax exemptions process and ensure that your business operates efficiently within the framework of UAE tax laws. Contact us today for expert advice on corporate tax and compliance in the UAE.
Understanding corporate tax exemptions is essential for any entity looking to optimize its operations in the UAE. From Qualifying Public Benefit Entities to extractive industries, the UAE tax landscape offers various paths to tax relief. However, tax regulations are strict regarding compliance with UAE documentation and corporate tax registration deadlines.
Are you unsure if your business qualifies for corporate tax exemptions in the UAE? Let our certified corporate tax consultants help you navigate the new tax regulations and ensure compliance.
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