Insights Corporate Tax
Corporate Tax Exempt Persons in the UAE: Who Qualifies and Why
UAE corporate tax exempt persons under Article 4 of Federal Decree-Law 47 of 2022 — the nine categories and the filings exemption does not remove.
Key takeaways
- Exempt persons are outside UAE Corporate Tax entirely — not the same as the 0% band on the first AED 375,000
- Article 4(1) of Federal Decree-Law No. 47 of 2022 lists nine categories, paragraphs (a) through (i)
- Paragraphs (f), (g), (h) and (i) must apply to the FTA for exemption under Article 4(3)
- Cabinet Decision No. 34 of 2025 replaced the old qualifying investment fund conditions from 1 January 2025
- Cabinet Decision No. 55 of 2025 extended exemption to foreign-incorporated subsidiaries, backdated to 1 June 2023
- Breach a condition and Article 4(5) pulls you back in from the start of that whole tax period
Corporate tax exempt persons in the UAE are the nine categories listed in Article 4(1) of Federal Decree-Law No. 47 of 2022 — government entities, government-controlled entities, extractive and non-extractive natural resource businesses, qualifying public benefit entities, qualifying investment funds, pension and social security funds, certain wholly owned subsidiaries, and persons named by Cabinet decision. Exemption removes the tax, not the records.
Most of the attention the UAE Corporate Tax regime attracted went to the headline mechanics: the 9% rate, the AED 375,000 threshold in Cabinet Decision No. 116 of 2022, the free zone rules. Far less went to the quieter idea that some entities sit entirely outside the tax. Business owners hear “exempt” and picture a discount or a box to tick. In practice an exempt person is not lightly taxed. For its exempt activity it is not taxed at all, because it never enters the charge.
That distinction changes everything downstream — what the entity owes, what it files, and what it has to keep proving year after year. This guide works through the Article 4 list in the order the law sets it out, then covers the application route, the ongoing obligations, and what it costs when the status turns out to be wrong.
Exempt is a status, not a rate
A taxable person is inside the system. It registers under Article 51, files an annual return under Article 53, and calculates taxable income under Article 20. If that income falls below AED 375,000 the tax on it is 0% — but the business is still a taxable person, still registered, still filing.
A qualifying free zone person under Article 18 is the same in principle. It can earn 0% on qualifying income while remaining fully a taxable person subject to the regime, with all the record-keeping and transfer pricing that implies.
An exempt person is a different animal. For its exempt activity it is outside the regime. It is not calculating taxable income and applying a 0% rate to it. It is simply not within the charge to tax in the first place. That is why misjudging your status is so much more expensive than misjudging a calculation.
9 categories
The closed list of exempt person types in Article 4(1) of Federal Decree-Law No. 47 of 2022, paragraphs (a) through (i)
Because the stakes are higher, the UAE keeps the list closed and specific. Exemption is granted by category, not by character. You cannot argue your way in on the basis that your activity feels charitable, or strategic, or state-adjacent. You either fit a defined category and meet its conditions, or you are a taxable person.
The nine categories in Article 4(1)
Every row in the table below was read against the English text of Federal Decree-Law No. 47 of 2022 as published by the UAE Ministry of Finance, on 4 August 2026.
| Art 4(1) | Category | Governing article | Route to exemption |
|---|---|---|---|
| (a) | Government Entity | Article 5 | By nature; taxable if it conducts a licensed business |
| (b) | Government Controlled Entity | Article 6 | By nature; taxable if it conducts a licensed business |
| (c) | Extractive Business | Article 7 | Conditions met and notification to the relevant authority |
| (d) | Non-Extractive Natural Resource Business | Article 8 | Conditions met and notification to the relevant authority |
| (e) | Qualifying Public Benefit Entity | Article 9 | Listed in the Cabinet decision |
| (f) | Qualifying Investment Fund | Article 10 | Application to the FTA under Article 4(3) |
| (g) | Public or private pension or social security fund | Article 4(1)(g) | Application to the FTA under Article 4(3) |
| (h) | Wholly owned UAE subsidiary of an exempt person | Article 4(1)(h) | Application to the FTA under Article 4(3) |
| (i) | Any other person determined by Cabinet decision | Article 4(1)(i) | Application to the FTA under Article 4(3) |
Article 4(3) is the sentence that decides the workload. Persons under paragraphs (f), (g), (h) and (i) “are required to apply to the Authority to be exempt from Corporate Tax in the form and manner and within the timeline prescribed by the Authority”. Under Article 4(4) the exemption then runs from the beginning of the tax period specified in the application, or another date the FTA determines.
Exempt person, 0% band and qualifying free zone person compared
| Feature | Exempt person (Art 4) | Taxable person under AED 375,000 | Qualifying free zone person (Art 18) |
|---|---|---|---|
| Inside the corporate tax charge | No, for the exempt activity | Yes | Yes |
| Rate applied | None — outside the charge | 0% up to AED 375,000, 9% above | 0% on qualifying income, 9% on the rest |
| Corporate tax registration | FTA may require it (Art 51(2)) | Required (Art 51(1)) | Required (Art 51(1)) |
| Annual tax return | FTA may request a declaration (Art 53(5)) | Required within 9 months (Art 53(1)) | Required within 9 months (Art 53(1)) |
| Audited financial statements | Not imposed by MD 84/2025 | Only if revenue exceeds AED 50m | Always (MD 84/2025 Art 2(1)(b)) |
| Record retention | 7 years (Art 56(2)) | 7 years (Art 56(1)) | 7 years (Art 56(1)) |
| Can join a tax group | No (Art 40(1)(e)) | Yes, if Art 40 conditions met | No (Art 40(1)(f)) |
The middle column is where most UAE SMEs actually sit, and it is the reason the taxable income and deductions rules under UAE corporate tax matter far more to the average business than the exemption schedule does.
Government entities and government-controlled entities
Article 5(1) exempts a government entity and disapplies the Decree-Law to it. Article 5(2) then reverses that where the entity conducts a business or business activity under a licence. The exemption protects the sovereign function, not commercial ventures wearing state ownership.
The same logic runs through Article 6 for government-controlled entities, which are wholly owned and controlled by a government entity and specified for the purpose. Taxing a government body’s income is largely circular — money moves from one public pocket to another — but a licensed trading arm is a different proposition.
Article 4(2) adds a technical point that catches people out. A person under paragraphs (a) to (d) that is a taxable person in respect of a licensed business is still treated as an exempt person for the purposes of Articles 26, 27, 38 and 40. That keeps it outside transfers within a qualifying group, business restructuring relief, tax loss transfer and UAE corporate tax groups.
Extractive and non-extractive natural resource businesses
The UAE reserves natural resource taxation to the emirate level. Article 7 covers extractive businesses — those exploiting the country’s natural resources — and Article 8 covers non-extractive natural resource businesses, meaning separation, treatment, refining, transport and distribution of those resources.
Neither is a favour. It is a division of taxing rights. These businesses are typically already subject to emirate-level taxation, so the federal regime steps back rather than charging the same income twice. Both categories depend on meeting the statutory conditions and notifying the relevant authority.
Qualifying public benefit entities under Article 9
Article 9(1) sets five conditions, all of which must be met.
| Art 9(1) | Condition |
|---|---|
| (a)(1) | Established and operated exclusively for religious, charitable, scientific, artistic, cultural, athletic, educational, healthcare, environmental, humanitarian, animal protection or similar purposes |
| (a)(2) | Or operated as a professional entity, chamber of commerce or similar body exclusively for social welfare or public benefit |
| (b) | Conducts no business except activities directly related to fulfilling its purpose |
| (c) | Income and assets used exclusively for that purpose or for necessary and reasonable associated expenditure |
| (d) | No income or assets available for the personal benefit of any shareholder, member, trustee, founder or settlor unless that party is itself a QPBE, government entity or government-controlled entity |
| (e) | Any further conditions set by Cabinet decision |
Listing is not optional. Article 9(2) makes the exemption effective from the beginning of the tax period in which the entity is listed in the Cabinet decision. That schedule is Cabinet Decision No. 37 of 2023, issued 7 April 2023 and effective 15 April 2023, amended eight times during 2024 by Cabinet Decisions No. 34, 70, 77, 78, 113, 128, 129 and 130. Article 9(3) lets the FTA request any relevant information or records to monitor continued compliance.
Qualifying investment funds: Article 10 plus Cabinet Decision No. 34 of 2025
Article 10(1) sets the statutory conditions for a fund applying to the FTA:
| Art 10(1) | Condition |
|---|---|
| (a) | The fund or its manager is subject to regulatory oversight of a competent authority in the UAE, or a recognised foreign competent authority |
| (b) | Interests are traded on a recognised stock exchange, or marketed and made available sufficiently widely to investors |
| (c) | The main or principal purpose is not to avoid Corporate Tax |
| (d) | Any further conditions set by Cabinet decision |
Paragraph (d) is now filled by Cabinet Decision No. 34 of 2025 on Qualifying Investment Funds and Qualifying Limited Partnerships, which replaced Cabinet Decision No. 81 of 2023. Article 2(1) adds three conditions for any fund other than a real estate investment trust.
| Source | Additional condition |
|---|---|
| CD 34/2025 Art 2(1)(a) | Principal business is Investment Business; anything else is ancillary or incidental |
| CD 34/2025 Art 2(1)(b) | Investors must not have control over day-to-day management of the fund |
| CD 34/2025 Art 2(1)(c) | The fund must give investors the information, documents and data needed to compute their adjusted taxable income |
| CD 34/2025 Art 2(2)(c) | Ancillary or incidental revenue must not exceed 5% of total revenue in the financial year |
Cabinet Decision No. 34 of 2025 also reaches through to investors. Article 3(2) requires a juridical investor to include a prorated share of the fund’s net profit where the fund has fewer than ten investors and that investor with its related parties holds 30% or more of the ownership interests, voting rights, board composition or profits. Where the fund has ten or more investors, Article 3(2)(b) raises that threshold to 50%.
Article 3(5) adds a real estate trigger: where a fund’s immovable property percentage exceeds 10% in a financial year, a juridical investor must include 80% of the prorated immovable property income. Article 3(6) switches that off where the fund distributes 80% or more of that income within nine months of the financial year end.
Timing for investors comes from FTA Decision No. 8 of 2025, issued 18 September 2025 and effective for tax periods commencing on or after 1 January 2025. Both of its registration windows apply to a foreign juridical person drawn in by a nexus, and which one applies turns on which clause of Cabinet Decision No. 35 of 2025 created that nexus.
| FTA Dec 8/2025 | Nexus arising under | Registration deadline |
|---|---|---|
| Art 2(1) | CD 35/2025 Art 2, clause 3 | 12 months from the end of the fund’s or REIT’s financial year |
| Art 2(2) | CD 35/2025 Art 2, clause 2 | 3 months from the end of the financial year in which the nexus is established |
| Art 3(1) | Investors adjusting income under CD 34/2025 Art 3(5) or Art 4(3) | File the return by the later of 12 months from the fund’s year end and 9 months from the investor’s own tax period end |
| Art 3(2) | The same investors | Settle the tax on the later of the same two dates |
Both registration rules apply “notwithstanding Clause 2 of Article 4 of Federal Tax Authority Decision No. 3 of 2024”, so they displace the ordinary three-month nexus deadline rather than sitting alongside it.
Pension and social security funds
Article 4(1)(g) exempts a public pension or social security fund, and a private one that is subject to regulatory oversight of the competent authority in the UAE and meets any further conditions the Minister prescribes. The rationale is social rather than fiscal: retirement savings accumulate for the future benefit of members, and taxing the pool as it grows works against the purpose of the fund.
Like funds under paragraph (f), pension schemes fall inside Article 4(3) and must apply to the FTA. The conditions typically require assets genuinely dedicated to providing member benefits and appropriate regulatory oversight, supported by evidence the FTA can inspect.
Subsidiaries of exempt persons — and the 2025 extension
Article 4(1)(h) exempts a juridical person incorporated in the State that is wholly owned and controlled by an exempt person under paragraphs (a), (b), (f) or (g), and that does one of three things: undertakes part or the whole of the exempt person’s activity, is engaged exclusively in holding assets or investing funds for its benefit, or only carries out ancillary activities.
Cabinet Decision No. 55 of 2025, issued 2 May 2025 but effective from 1 June 2023, closes the gap for offshore structures. It uses the paragraph (i) power to exempt a taxable person incorporated under the legislation of a foreign jurisdiction that is wholly owned and controlled by an exempt person under paragraphs (a), (b), (f) or (g), on the same three activity conditions.
The backdating matters. A group that held a foreign subsidiary under a UAE pension fund since 2023 can now line the treatment up across the whole period rather than carrying an inconsistency into its filings.
Exemption removes the tax, never the responsibility. The entities that keep their status are the ones that treat it as a condition to be maintained every year, not a certificate to be framed once.
What an exempt person still has to do
Exemption removes the charge to tax. It does not remove the surrounding machinery.
Registration. Article 51(2) lets the FTA require a person under paragraphs (e) to (i) of Article 4(1) to register for Corporate Tax and obtain a Tax Registration Number, either for the purposes of the exemption itself or for the declaration power in Article 53(6).
Declarations. Article 53(5) allows the FTA to request a declaration from persons under those same paragraphs. Failing to submit one, or submitting it late, is a monthly penalty under item 13 of Cabinet Decision No. 75 of 2023.
Records. Article 56(2) requires an exempt person to keep all records that enable its status to be readily ascertained by the FTA for seven years after the end of the relevant tax period.
Financial statements. Article 54(1) lets the FTA request the financial statements used to determine taxable income. Article 54(2) lets the Minister require categories of taxable persons to prepare audited or certified statements — the power exercised in Ministerial Decision No. 84 of 2025.
Who must produce audited financial statements
Ministerial Decision No. 84 of 2025 was issued on 25 March 2025 and applies to tax periods commencing on or after 1 January 2025. It repealed Ministerial Decision No. 82 of 2023, which continues to apply to earlier periods.
| MD 84/2025 | Who | Requirement |
|---|---|---|
| Art 2(1)(a) | A taxable person that is not a tax group with revenue above AED 50,000,000 in the tax period | Audited financial statements |
| Art 2(1)(b) | Every qualifying free zone person | Audited financial statements, regardless of revenue |
| Art 2(2) | A tax group | Audited special purpose financial statements in the form the FTA specifies |
| Art 2(3) | A QFZP distributing goods in or from a Designated Zone | Additional FTA procedures |
| Art 2(4) | A non-resident person | Only revenue through UAE permanent establishments and nexuses counts toward AED 50m |
Read the columns carefully. The AED 50 million audited-accounts test in Article 2(1)(a) applies only to a taxable person that is not a tax group. Exempt persons are not named in Article 2 at all. That does not mean an exempt fund or pension scheme escapes audit — its regulator, its constitutional documents and the FTA’s information powers usually get there anyway — but the obligation does not come from Ministerial Decision No. 84 of 2025.
Registration deadlines, if you turn out to be taxable
If the exemption fails, the registration clock was always running. FTA Decision No. 3 of 2024, issued 22 February 2024 and effective 1 March 2024, sets the timelines. Article 3(3) covers entities formed on or after 1 March 2024.
| Category | Deadline (FTA Decision No. 3 of 2024) |
|---|---|
| UAE-incorporated juridical person, including a Free Zone Person | 3 months from incorporation, establishment or recognition |
| Foreign-incorporated person effectively managed and controlled in the UAE | 3 months from the end of its financial year |
| Non-resident with a Permanent Establishment (arising on or after 1 Mar 2024) | 6 months from the date the PE exists |
| Non-resident with a nexus in the UAE (arising on or after 1 Mar 2024) | 3 months from establishment of the nexus |
| Resident natural person over the turnover threshold | 31 March of the subsequent Gregorian calendar year |
If a permanent establishment is what pulls a foreign parent into the UAE net, the tests in Article 14 are worth reading in full — we walk through them in our guide to permanent establishment under UAE corporate tax.
Losing the exemption, and why it bites retroactively
Article 4(5) is one sentence and it is the most important sentence in the chapter. Where an exempt person fails to meet any of the relevant conditions at any particular time during a tax period, that person ceases to be an exempt person from the beginning of that tax period.
Not from the date of the breach. From the beginning. A fund that quietly drifts past the 5% ancillary revenue ceiling in month eight does not become taxable in month nine. It becomes taxable in month one, with a return, a computation and a payment that were never prepared.
Article 4(6) gives the Minister a relief valve in three cases:
| Art 4(6) | Circumstance |
|---|---|
| (a) | Failure results from the liquidation or termination of the person |
| (b) | Failure is temporary, will be promptly rectified, and appropriate monitoring procedures are in place |
| (c) | Any other instance the Minister prescribes |
Paragraph (b) is the one worth designing for. “Appropriate procedures are in place to monitor the compliance” is not a plea you can make retrospectively. Either the monitoring existed before the breach or it did not.
A worked example in AED
A UAE private pension fund holds AED 240,000,000 of member assets and secured FTA approval under Article 4(1)(g) with effect from its tax period beginning 1 January 2025. During October 2025 a segregation failure lets AED 4,000,000 of scheme assets sit temporarily in a sponsor operating account.
If that failure breaches a condition of the exemption and Article 4(6)(b) relief is not available, Article 4(5) removes exempt status from 1 January 2025. The fund becomes a taxable person for the whole of 2025, with a return due within nine months of 31 December 2025 under Article 53(1) — that is 30 September 2026.
Suppose the resulting taxable income for 2025 is AED 5,375,000. Under Article 3(1) and Cabinet Decision No. 116 of 2022, the first AED 375,000 is taxed at 0% and the remaining AED 5,000,000 at 9%, giving corporate tax of AED 450,000. Add a late registration penalty of AED 10,000 under item 14 of Cabinet Decision No. 75 of 2023 and monthly return penalties from item 7, and the cost of a two-week banking lapse compounds fast.
Now run the same facts with monitoring in place. The trustees hold a documented quarterly segregation review, the October breach is caught within days, the assets are returned, and the file records the correction. That is the fact pattern Article 4(6)(b) was written for.
What it costs when the status is wrong
Every penalty below was read against Cabinet Decision No. 75 of 2023 and its amendments as published by the UAE Ministry of Finance, on 4 August 2026.
| Item | Violation | Penalty (AED) |
|---|---|---|
| 1 | Failure to keep the required records and information | 10,000; 20,000 for a repeat within 24 months |
| 2 | Failure to submit tax data, records and documents in Arabic on request | 5,000 |
| 3 | Late deregistration application | 1,000 monthly, capped at 10,000 |
| 4 | Failure to notify the FTA of a change to the tax record | 1,000; 5,000 for a repeat within 24 months |
| 7 | Late tax return | 500 per month for months 1–12; 1,000 per month from month 13 |
| 8 | Failure to settle payable tax | Monthly penalty of 14% per annum on the unsettled amount |
| 10 | Voluntary disclosure of errors | 1% per month on the tax difference |
| 11 | Failure to voluntarily disclose before audit notification | Fixed 15% of the tax difference plus 1% per month |
| 12 | Failure to facilitate a tax auditor | 20,000 |
| 13 | Failure to submit, or late submission of, a declaration | 500 per month for months 1–12; 1,000 per month from month 13 |
| 14 | Late tax registration application | 10,000 (added by Cabinet Decision No. 10 of 2024) |
Two of those deserve emphasis for exempt entities. Item 13 catches the declaration duty in Article 53(5) that many exempt persons do not realise applies to them. Item 1 catches the Article 56(2) record-keeping duty that survives the exemption entirely.
An annual condition calendar for exempt persons
| When | What | Source |
|---|---|---|
| Within 3 months of incorporation | Register if the entity is or may be a taxable person | FTA Decision No. 3 of 2024, Art 3(3) |
| Before the start of the tax period | Confirm the Article 4 category and evidence its conditions | FDL 47/2022 Art 4(1) |
| Quarterly | Review the live conditions — ownership spread, ancillary revenue, asset segregation, listed purpose | FDL 47/2022 Art 4(5) |
| Within 6 months of the financial year end | QIF supplies investors with income data where Art 3(2) applies | FTA Decision No. 8 of 2025, Art 4(1) |
| Within 9 months of the financial year end | QIF confirms in writing whether it distributed 80% or more of immovable property income | FTA Decision No. 8 of 2025, Art 4(2) |
| Within 9 months of the tax period end | File the return if the entity turned out to be taxable | FDL 47/2022 Art 53(1) |
| Within 12 months of the fund’s year end | Foreign juridical investors with a CD 35/2025 Art 2(3) nexus register | FTA Decision No. 8 of 2025, Art 2(1) |
| Within 3 months of the fund’s year end | Foreign juridical investors with a CD 35/2025 Art 2(2) nexus register | FTA Decision No. 8 of 2025, Art 2(2) |
| Ongoing, for 7 years | Retain everything that evidences the exempt status | FDL 47/2022 Art 56(2) |
How exemption fits the wider picture
Place exempt persons on the same map as everyone else and the regime resolves into three positions. An entity is a taxable person, registering and filing and paying 9% above AED 375,000. Or it is a qualifying free zone person under Article 18, a sub-set of taxable person earning 0% on qualifying income while carrying every compliance duty — the route we cover in detail in our guide to the qualifying free zone person and the QFZP 0% rules. Or it is an exempt person under Article 4, outside the regime for its exempt activity.
Everything downstream flows from that classification — registration, filing, the records you keep, the deadlines you watch. Getting the classification wrong costs more than getting a calculation wrong, because it invalidates an entire year’s approach rather than one line of it.
Where this leaves you
Exempt does not mean absent. A corporate tax exempt person in the UAE is a defined category under Article 4(1) of Federal Decree-Law No. 47 of 2022 that sits outside the tax rather than paying it at a reduced rate. Four of the nine categories have to apply to the FTA and keep proving they qualify. Nearly all of them still carry real duties to register, keep records for seven years, and evidence their conditions.
The entities that hold their exemption cleanly treat it as a live status. They keep their books current, they review conditions on a schedule rather than on discovery, and they can answer an Article 9(3) or Article 54(1) request without scrambling. If you are not certain which of the three classifications your entity falls into, confirm it and document the basis rather than assume.
Velmont Crest is a DED-licensed UAE accounting firm providing advisory and preparation support on Corporate Tax classification, registration and reporting for SMEs, funds and mission-driven entities across the mainland and free zones. Read more on our insights hub, see our corporate tax services, or get in touch via our contact page.
Disclaimer: Velmont Crest is a DED-licensed accounting firm providing advisory, preparation and compliance support services. We are not a law firm, the Federal Tax Authority, or an FTA-registered tax agent representing clients before the FTA. UAE Corporate Tax rules on exempt persons are set and updated by the Ministry of Finance and the Federal Tax Authority — verify your specific position against current legislation, Cabinet decisions and FTA guidance, and take professional advice tailored to your circumstances before acting.
References
- Federal Decree-Law No. 47 of 2022 on the Taxation of Corporations and Businesses — UAE Ministry of Finance
- Cabinet Decision No. 55 of 2025 on Exempting Certain Persons from Corporate Tax — Federal Tax Authority
- Cabinet Decision No. 34 of 2025 on Qualifying Investment Funds and Qualifying Limited Partnerships — UAE Ministry of Finance
- Ministerial Decision No. 84 of 2025 on Audited Financial Statements — Federal Tax Authority
- Cabinet Decision No. 75 of 2023 and its amendments on Administrative Penalties — Federal Tax Authority
- FTA Decision No. 3 of 2024 on the Registration Timeline — Federal Tax Authority
- UAE Government portal — Corporate Tax — u.ae
Frequently asked questions
- What is an exempt person under UAE Corporate Tax?
- An exempt person is an entity that falls outside the scope of UAE Corporate Tax, so it does not pay the tax on its income at all. Article 4(1) of Federal Decree-Law No. 47 of 2022 lists nine categories: government entities, government-controlled entities, extractive businesses, non-extractive natural resource businesses, qualifying public benefit entities, qualifying investment funds, pension and social security funds, certain wholly owned UAE subsidiaries of those exempt persons, and any other person named by Cabinet decision. This is different from a business whose taxable income falls under AED 375,000 and is taxed at 0% — that business is still inside the system and still files a return.
- Do exempt persons still need to register with the FTA and keep records?
- In most cases yes. Article 51(2) of Federal Decree-Law No. 47 of 2022 lets the FTA require persons under paragraphs (e) to (i) of Article 4(1) to register for Corporate Tax and obtain a Tax Registration Number. Article 56(2) is blunter: an exempt person must keep all records that let its status be readily ascertained by the FTA for seven years after the end of the tax period they relate to. Article 53(5) also allows the FTA to require a declaration. Exemption changes what you file. It does not delete the file.
- How is exemption different from the 0% corporate tax rate?
- They both produce a zero tax bill and they are legally nothing alike. Article 3(1) of Federal Decree-Law No. 47 of 2022, read with Cabinet Decision No. 116 of 2022, taxes the first AED 375,000 of taxable income at 0% and the excess at 9% — but that business is a taxable person, registered and filing. A qualifying free zone person under Article 18 earns 0% on qualifying income while still being a taxable person. An exempt person under Article 4 is outside the charge to tax for its exempt activity. The conditions, the filing duties and the consequences of getting it wrong all differ.
- Which UAE entities are automatically exempt and which have to apply?
- Government entities under Article 5 and government-controlled entities under Article 6 are exempt by their nature. Extractive businesses under Article 7 and non-extractive natural resource businesses under Article 8 are exempt where they meet the conditions and notify the relevant authority. Qualifying public benefit entities under Article 9 become exempt from the tax period in which they are listed in the Cabinet decision — currently Cabinet Decision No. 37 of 2023 and its amendments. Article 4(3) is the dividing line for everyone else: paragraphs (f), (g), (h) and (i) must apply to the FTA in the form, manner and timeline the FTA prescribes.
- Can a UAE company lose its exempt status, and from when?
- Yes, and the timing is the part that hurts. Article 4(5) of Federal Decree-Law No. 47 of 2022 says that where an exempt person fails to meet any of the relevant conditions at any particular time during a tax period, it ceases to be an exempt person from the beginning of that tax period. The whole period reopens, not just the months after the breach. Article 4(6) gives the Minister power to soften this in three cases — liquidation or termination, a temporary failure that is promptly rectified with monitoring procedures in place, and any other instance the Minister prescribes.
- What conditions must a qualifying investment fund meet in 2026?
- Two layers. Article 10(1) of Federal Decree-Law No. 47 of 2022 requires regulatory oversight of the fund or its manager, interests traded on a recognised stock exchange or marketed sufficiently widely, and a main purpose that is not corporate tax avoidance. Cabinet Decision No. 34 of 2025, which applies to tax periods commencing on or after 1 January 2025, adds three more: the fund's principal activity must be investment business, investors must not control day-to-day management, and the fund must give investors the information they need to compute their own adjusted taxable income. Ancillary revenue is capped at 5% of total revenue.
- Does a qualifying public benefit entity have to be listed by the Cabinet?
- Yes. Article 9(2) of Federal Decree-Law No. 47 of 2022 makes the exemption effective from the beginning of the tax period in which the entity is listed in the Cabinet decision issued at the Minister's suggestion, or another date the Minister determines. Cabinet Decision No. 37 of 2023 carries that schedule and has been amended repeatedly — by Cabinet Decisions No. 34, 70, 77, 78, 113, 128, 129 and 130 of 2024. Self-certification does not work here. If your entity is not on the schedule, it is not a qualifying public benefit entity, however charitable its purpose.
- What happens to an exempt person's UAE subsidiaries?
- Article 4(1)(h) exempts a juridical person incorporated in the UAE that is wholly owned and controlled by an exempt person under paragraphs (a), (b), (f) or (g), provided it only undertakes part or all of the exempt person's activity, holds assets or invests funds exclusively for that exempt person, or carries out only ancillary activities. Cabinet Decision No. 55 of 2025, issued 2 May 2025 and effective from 1 June 2023, extends the same treatment to a person incorporated under the legislation of a foreign jurisdiction on the same three conditions. Both routes still require an application under Article 4(3).
- Do exempt persons need audited financial statements?
- Ministerial Decision No. 84 of 2025 governs audited financial statements and it is written around taxable persons — a taxable person that is not a tax group with revenue above AED 50,000,000, every qualifying free zone person, and tax groups, which must prepare audited special purpose statements. It does not impose a blanket audit duty on exempt persons. In practice, the conditions attached to individual exempt categories, the regulator supervising a fund or pension scheme, and the FTA's power under Article 9(3) and Article 54(1) to request records and statements mean most exempt entities end up producing audited accounts anyway.
- What penalty applies if an exempt person gets its status wrong?
- If the FTA determines the entity was in fact a taxable person, the ordinary Corporate Tax penalty schedule in Cabinet Decision No. 75 of 2023 applies. Failing to submit a tax registration application on time is AED 10,000 under item 14, added by Cabinet Decision No. 10 of 2024. A late return runs at AED 500 a month for the first twelve months and AED 1,000 a month from the thirteenth. Late payment attracts a monthly penalty of 14% per annum on the unsettled amount. Failing to keep the required records is AED 10,000, or AED 20,000 for a repeat within 24 months.
- How long must an exempt person keep its records in the UAE?
- Seven years. Article 56(2) of Federal Decree-Law No. 47 of 2022 requires an exempt person to maintain all records that enable its exempt status to be readily ascertained by the FTA for seven years following the end of the tax period to which they relate. That is the same retention period Article 56(1) imposes on taxable persons. The practical reading is that your evidence of qualifying — fund documentation, regulatory approvals, ownership registers, trust deeds, board minutes — needs the same archive discipline as a tax computation.
- Can an exempt person be part of a corporate tax group?
- No. Article 40(1)(e) of Federal Decree-Law No. 47 of 2022 requires that neither the parent company nor the subsidiary is an exempt person. Article 40(2) carves out one narrow case: subsidiaries in which a government entity directly or indirectly owns at least 95% can form a tax group subject to conditions prescribed by the FTA. Article 4(2) also treats persons under paragraphs (a) to (d) that are taxable in respect of a licensed business as exempt persons for the purposes of Articles 26, 27, 38 and 40, which keeps them outside grouping and loss transfer.
- When does a qualifying investment fund's investor have to register for corporate tax?
- FTA Decision No. 8 of 2025, issued 18 September 2025, sets two timelines and both are nexus routes for a foreign juridical person. Article 2(1) gives twelve months from the end of the fund's or REIT's financial year where the nexus arises under Article 2, clause 3 of Cabinet Decision No. 35 of 2025. Article 2(2) gives three months from the end of the financial year in which the nexus is established where it arises under Article 2, clause 2 of that decision. Both override Article 4(2) of FTA Decision No. 3 of 2024.
Filed under: corporate tax exempt persons uae, corporate tax, exempt persons, qualifying investment fund, pension fund, FTA, Federal Decree-Law 47, UAE tax
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