UAE Tax Exemption: Who Is Exempt from Corporate Tax
With the introduction of UAE Corporate Tax, many businesses started reassessing their tax obligations. However, not every company operating in the UAE is required to pay corporate tax. To maintain its reputation as a global business hub, the government offers UAE tax exemption benefits to specific sectors and organisations. These exemptions help protect essential industries, encourage investment, and support public welfare.
Understanding who qualifies for UAE tax exemption is crucial, as it can make a significant difference to a company’s financial planning and long-term growth.
Who Is Exempt from UAE Corporate Tax?
Government Entities
Federal and local government bodies benefit from full UAE tax exemption, allowing public services to operate without corporate tax obligations.
Extractive and Natural Resource Businesses
Companies involved in the extraction of natural resources—such as oil, gas, and mining—are exempt as long as they are subject to emirate-level taxes or royalty regimes rather than federal corporate tax.
Public Benefit Organisations
Registered charities and public benefit institutions that serve social, humanitarian, educational, or religious purposes can qualify for tax exemption. To benefit, these organisations must be officially recognised by the UAE authorities and strictly operate within approved non-profit activities.
Recognised Investment Funds
Investment funds that meet regulatory requirements and are approved by UAE authorities are also exempt from corporate tax. This exemption supports the UAE’s strategy to attract global investments and strengthen its financial sector.
Free Zone Companies – 0% Corporate Tax on Qualifying Income
Free zone entities can benefit from UAE tax exemption on qualifying income and continue to enjoy a 0% corporate tax rate if they:
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Maintain sufficient economic substance within the free zone
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Follow transfer pricing requirements
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Keep audited financial statements
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Avoid restricted mainland business activities
Non-qualifying income will still be taxed at the standard rate.
Small Business Relief (Valid Until 2026)
Small Business Relief is part of the UAE tax exemption framework designed for startups and SMEs. Companies earning up to AED 3 million annually can be treated as having no taxable income and avoid paying corporate tax until 31 December 2026.
Eligible businesses must formally claim this UAE tax exemption benefit to receive the relief.
Important Note: Exemptions Are Not Automatic
While these exemptions offer major advantages, they do not apply automatically. Businesses must:
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Apply for recognition or classification where required
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Maintain proper documentation
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Meet ongoing compliance standards, including audits and reporting requirements
Failing to meet these conditions could lead to loss of exemption, penalties, or unexpected tax liabilities.
Final Thoughts
Understanding where your business stands within the UAE’s corporate tax framework can help you legally reduce tax liabilities and avoid unnecessary costs. By staying informed and compliant, businesses can benefit from available exemptions while continuing to operate smoothly and competitatively in the UAE market.
If you are unsure whether your company qualifies for an exemption or want help with documentation and compliance, professional tax advice is strongly recommended.`
When it comes to navigating UAE tax exemption and corporate tax compliance, expert guidance can make all the difference. PFA Global is a trusted business advisory firm in the UAE, providing end-to-end tax and compliance solutions tailored to your company’s needs.
From corporate tax registration and exemption assessments to Free Zone compliance, Small Business Relief claims, VAT services, and audit coordination, PFA Global helps businesses remain fully compliant while optimizing their tax position legally.
