Since the introduction of Corporate Tax Law in the UAE, there has been discussion and lots of questions regarding this law. People, especially those involved in businesses, are keen to know who qualifies for this tax, what rate is applicable, how to file its return, when to file its return, who is exempt from UAE corporate tax, and the list goes on.
The UAE corporate tax law broadly applies to juridical persons, but it also lists specific exemptions and special cases. Understanding those exceptions helps management decide whether to restructure, seek approvals, or simply document the facts. Good advisors protect value by clarifying who is exempt and why, and by helping companies work with the best accountants and the right UAE corporate tax advisory teams.
Who the law exempts in principle
The UAE’s Federal Decree-Law and the Ministry of Finance guidance identify clear categories of exempt persons. Exemptions include certain public bodies, qualifying public benefit entities, qualifying investment funds, public and private pension and social security funds, and businesses engaged in the extraction of natural resources. The law also recognises exemptions that are effective only when an entity is listed in a Cabinet decision or approved by the Federal Tax Authority. These categories are not vague labels; they come with tests and application processes that a business must meet before a tax authority will accept the exemption. For detail and official guidance, the Ministry of Finance and the Federal Tax Authority explain these categories in their published material.
Government entities and government-controlled companies
Federal and Emirate governments and many government-controlled entities are generally treated as exempt when they perform sovereign or mandated activities. This exemption recognises the public nature of those activities and avoids taxing state functions twice. However, if a government entity carries on a commercial business under a licence, the revenue from that business may be taxable. Because the line between mandated activity and commercial trade is factual, businesses in this space routinely work with the best accountants to document the nature of income and to preserve any available exemption.
Qualifying Public Benefit Entities and charities
The law allows a defined exemption for Qualifying Public Benefit Entities. These are organisations that exist for religious, charitable, scientific, cultural, educational, healthcare or similar public purposes and that meet the conditions set out in the statute and in subsequent Cabinet decisions. To claim exemption, an organisation must be approved and listed as a qualifying public benefit entity, and it must operate within the permitted activities. The Federal Tax Authority published guidance on the application process and evidentiary requirements. When charities or foundations consider tax status, they rely on experienced UAE corporate tax advisory teams to make formal applications and to prepare the supporting documentation that regulators expect.
Qualifying investment funds, pension funds and social security funds
Certain investment funds and pension or social security funds are exempt, subject to conditions. The exemptions are designed to avoid taxing collective investment vehicles and public pension pools at the fund level where other tax or withholding rules already apply to investors or beneficiaries. The Federal Tax Authority’s lists and guidance explain qualifying criteria and the registration process. Trustees and fund managers typically engage the best accountants to ensure that governance, custody and reporting meet the test for exemption before making claims.
Extractive businesses and natural resource activities
The UAE corporate tax framework treats extraction businesses and some natural resource activities differently. Companies engaged in the extraction of oil, gas, or minerals are not subject to corporate tax law and are instead governed by a distinct tax scheme established by the respective emirate or through individual agreements. Non-extraction businesses in support of the natural resource sector may benefit also from some specialized rules. For companies in these sectors, pragmatic advice from a specialist UAE corporate tax advisory team is essential to confirm the applicable regime and to document how revenues should be reported.
Wholly owned subsidiaries of exempt persons and controlled entities
The law recognises that subsidiaries wholly owned and controlled by an exempt person may also be treated differently in certain circumstances. Where a parent is an exempt public entity or qualifying body, its wholly owned subsidiaries may benefit from exemption for specific activities that are directly linked to the exempt purpose. These provisions are narrow and fact-driven, so companies use the best accountants and legal advisers to build a clear record that supports any claim.
Free zone persons
Free zones remain commercially attractive, but the position for free zone persons is nuanced. A qualifying free zone person may be eligible for a 0% tax rate on qualifying income if strict conditions are satisfied, including substance, allowed activities and compliance with transfer pricing rules. Importantly, a qualifying free zone person is generally not eligible for the small-business 0% threshold and instead follows the special free zone rules for qualifying income. The Federal Tax Authority provides a dedicated bulletin explaining the rules for free zone persons and the limits of the exemption. Businesses that operate in free zones should engage UAE corporate tax advisory services and the best accountants to ensure their activities genuinely qualify and that reporting obligations are met.
Non-resident persons and personal investment activities
Non-resident persons that do not have a permanent establishment in the UAE are generally outside the scope of UAE corporate tax. Similarly, personal investment activities carried on by a natural person, for their own account and not through a trade licence, typically fall outside the corporate tax net. These outcomes depend on precise facts such as the existence of a permanent establishment in the UAE, the nature of the license held, and whether the activity is commercial. Correctly characterising these activities usually requires input from an experienced UAE corporate tax advisory team and validation by the best accountants to avoid a mistaken classification that could lead to assessment.
Registration exceptions and practical compliance points
Some exempt categories do not require corporate tax registration unless they carry on a taxable business. The Federal Tax Authority’s guidance lists persons that are not required to register but advises registration where an entity engages in taxable activities. Because registration choices affect compliance, auditors and tax agents typically recommend engaging the best accountants and corporate tax advisors early. That step avoids late registrations and potential penalties, and it ensures that exemptions are claimed only where supportable under published rules.
How the process works in practice
Claiming exemption is not a single form. It is a process. Entities must demonstrate that they meet the statutory tests, provide supporting governance documentation, and often obtain a formal determination or be listed in a Cabinet decision. The Federal Tax Authority publishes guides that show the evidence required for public benefit entities, investment funds and other exempt persons. A practical approach is to compile a dossier, test the position with legal counsel and submit an application or notification to the FTA where required. For these tasks many organisations prefer to work with the best accountants and to retain UAE corporate tax advisory services that specialise in exemptions.
Why specialist advice is Important
The exemptions are valuable but conditional. Small mistakes in substance, documentation, or transactional structure can void an exemption and create unexpected tax liabilities. For this reason, companies hire the best accountants to keep reliable books and to document the facts. They retain UAE corporate tax advisory firms to develop the legal submissions, coordinate with regulators, and to advise on the interaction between corporate tax and other regimes such as VAT, customs, or free zone incentives. Well-executed advice reduces risk and preserves the intended benefit of exemptions.
Practical steps for companies that think they may be exempt
Start by testing whether your entity falls into a listed category and whether the activity is a taxable business. Prepare evidence of governance, purpose, and economic substance. Get an early read from the best accountants who understand local reporting norms and secure a formal opinion from a UAE corporate tax advisory firm. Where necessary, submit the supporting documents to the Federal Tax Authority or apply for Cabinet listing. Maintain a regular review process because exemptions may depend on continuing eligibility.
Conclusion
Exemptions from UAE corporate tax are narrowly defined and strictly administered. Categories such as government entities, qualifying public benefit entities, qualifying investment funds, pension funds, and extractive businesses are the main exempt classes, but each class carries conditions. The path to a successful exemption turns on good records, clear governance and rigorous evidence. For any company that considers claiming an exemption, working with the best accountants and with expert UAE corporate tax advisory partners is the practical and safe way to secure the outcome. With SSCOGLOBAL accurate advice, companies can protect value, reduce uncertainty and focus management time on the business rather than on disputes with tax authorities.
