UAE Expands Corporate Tax Exemption to Certain Foreign-Owned Entities

The UAE corporate tax rules keep shifting as the regime matures. A new cabinet decision in 2025 widened exemption rules for some foreign-owned entities that sit inside government and fund structures. This change aims to put foreign holding platforms on a similar footing as UAE entities that already enjoy exempt status.

For boards and group CFOs, the update is good news, but it also means fresh tests on ownership, control and management. Those groups using foreign vehicles in Europe or Asia that hold UAE assets must check how the new exemption works in practice.

Quick Reminder of UAE Corporate Tax Basics

The federal regime under Federal Decree-Law No. 47 of 2022 applies across all Emirates. In simple terms, corporate tax in Dubai follows the same federal rules as Abu Dhabi or Sharjah. 

Profits up to AED 375,000 sit at 0 percent and profits above that band are usually taxed at 9 percent, subject to special regimes for free zones, small business relief and exempt persons.

Tax applies to UAE-resident juridical persons on worldwide business income, with some relief for foreign permanent establishments and qualifying shareholdings. Non-resident companies face tax on UAE permanent establishments and on some UAE-sourced income.

At the same time, the law sets out a closed list of “Exempt Persons.” These entities sit outside the charge to tax if they meet detailed conditions and often still have filing or registration duties.

Who Counts as an Exempt Person Today

Article 4 of the Corporate Tax Law lists the main categories of Exempt Person. The core ones relevant to the new change include: 

• Federal and Emirate government entities.
• Government-controlled entities named in cabinet decisions.
• Qualifying investment funds that meet Article 10 and cabinet tests.
• Public pension and social security funds and some private schemes that meet extra conditions.

Cabinet decisions and ministerial guidance keep adjusting how these categories work in practice. For example, Cabinet Decision No. 34 of 2025 updated how qualifying investment funds and qualifying limited partnerships can apply for exemption and set extra tests on investors and asset levels.

Until 2025, foreign companies that were wholly owned by such exempt persons did not always enjoy the same treatment, even if they acted as simple holding or funding vehicles.

What Has the New Cabinet Decision Changed?

Cabinet Decision No. 55 of 2025 is the key trigger for the current update. The Ministry of Finance announced that this decision expands the scope of the exemption to cover certain foreign entities that are wholly owned by exempt UAE persons.

In practice, this means a foreign company can now qualify as an Exempt Person if:

• It is a foreign juridical person, such as a company or similar body.
• It is wholly owned by an exempt government entity, a government-controlled entity, a qualifying investment fund, or a public pension or social security fund that already meets the exemption tests.

Core Conditions for Foreign-Owned Companies

The new exemption is not automatic. Foreign-owned vehicles must pass several filters before they can rely on the new relief.

1. Ownership And Control

The foreign entity must be “wholly owned” by one or more exempt persons listed in Article 4. In many cases this means a single exempt owner, although cabinet guidance also covers some joint ownership cases inside a wider exempt group. Boards need to check legal share registers and any nominee arrangements against this test.

2. Purpose And Activities

In most cases, the foreign company should act as a holding, funding or investment platform for the exempt owner. If the entity runs an active trading or service business, or deals with parties outside the exempt group on a large scale, it may fall outside the exemption and slip back into normal taxable status.

3. Place Of Effective Management

Some foreign entities have their key decision-making in the UAE. If the place of effective management sits inside the UAE, the company already counts as a UAE resident person under the law. The cabinet decision expects such entities to still meet the exempt person tests and also fit inside the wider framework on residents, tax groups and foreign permanent establishments.

4. No Double Counting With Other Regimes

Groups must take care that the same income is not claimed as exempt twice under overlapping rules, such as the participation exemption for qualifying shareholdings or the small business relief regime. Tax advisers will usually test which relief gives the clearer result and shape the structure accordingly.

Impact on Corporate Tax Exemption In Dubai

For holding platforms tied to Dubai government entities, funds and pension schemes, the update can reshape the corporate tax exemption in Dubai landscape. A foreign SPV that holds shares in a Dubai project company may now sit outside the tax net once it meets the new tests and secures exempt status.

This also affects groups that already rely on UAE corporate tax exemption rules for domestic entities. They need to revisit the map of foreign links and see which vehicles can join the exempt ring. That review should cover treaty holding companies, regional treasury centres and foreign funds that feed into Dubai assets.

The cabinet decision also fits into a wider line of updates that refine investment fund and partnership rules. When read together with Cabinet Decision No. 34 of 2025 on qualifying investment funds and limited partnerships, the regime gives more neutral outcomes for cross-border fund structures that use both UAE and foreign vehicles.

Practical Steps for Foreign-Owned Groups

Boards, CFOs and tax teams in groups that use foreign vehicles linked to UAE exempt owners should move through a structured review. For most groups, the process will look like this.

1. Map All Foreign Juridical Persons

Start with a clean list of all foreign companies and similar bodies that sit under a UAE exempt owner. Note legal form, jurisdiction, shareholding and main business purpose. Tax teams should add data on board location and key management decisions.

2. Test Each Entity Against The New Rules

For each foreign vehicle, check:

• Does an Article 4 exempt person hold 100 percent of legal and economic interest.
• Does the entity act only as a holding or investment platform for the exempt owner.

Entities that pass both gates can move to the next stage and assess filing needs and timing.

3. Align Registrations and Filings

The decision applies with effect from 1 June 2023 for many cases, so some entities may need to revisit corporate tax registrations, elections and filed returns. In some cases, groups may apply to change status out of taxable to exempt and correct returns on a retrospective basis, subject to Federal Tax Authority guidance on process.

4. Update Governance and Documentation

Foreign-owned entities that rely on the new exemption should keep strong minutes, shareholder resolutions and board records that show the link to exempt owners. They should also align inter-company contracts and pricing with UAE transfer pricing rules, even where income is exempt, to avoid later disputes on allocation of profits inside the group.

Key Points for Foreign Owned Companies Corporate Tax UAE

For foreign owned companies corporate tax UAE planning now has three pillars.

• First, the basic UAE rate structure still applies to most operating companies. 
• Second, exempt persons such as government entities and qualifying funds keep their separate ring. 
• Third, cabinet decisions now allow some foreign vehicles inside that exempt ring, so long as they are wholly owned by the exempt persons and act within tight limits.

As new guidance notes and FTA bulletins appear, groups should keep a close eye on examples that show how the rules apply in practice to joint ventures, layered fund chains and complex partnership structures. Professional advice remains vital at each step, especially where more than one state claims taxing rights.

How Arnifi Can Help?

Arnifi’s accounting and bookkeeping services help UAE groups that sit across several jurisdictions and need clean, low-risk structures. For boards tracking UAE corporate tax cabinet decision changes, the team can:

• Review current group charts and tag entities that may now qualify as exempt.
• Model outcomes under taxable and exempt scenarios and test impact on cash yields.
• Support re-registration, return corrections and FTA queries linked to status changes.

If your group uses foreign holding platforms tied to UAE exempt owners, this is a good moment to tidy the map, confirm which entities can rely on the new relief and close any gaps in documentation before the next tax period closes.

FAQs

Q1. What changed in corporate tax in Dubai for some foreign entities in 2025?

A new UAE corporate tax cabinet decision widened exemption rules for certain foreign-owned companies. It lets some vehicles owned by exempt UAE bodies sit outside normal tax, if they pass tests.

Q2. Which foreign companies can now get corporate tax exemption in Dubai?

Only foreign entities that are wholly owned by exempt UAE persons, such as qualifying funds or government bodies, may qualify. They must mainly hold or fund investments, not run a full trading business.

Q3. How do UAE corporate tax exemption rules check “ownership and control”?

The law expects 100 percent legal and economic ownership by the exempt person or group. Boards should review share registers and legal agreements, so structures match the exemption conditions.

Q4. What should foreign owned companies corporate tax UAE teams do first?

They should map every foreign company linked to exempt UAE owners and list roles and locations. Then they can test which entities meet the new exemption rules before changing filings.

Q5. Does the new decision remove filing needs for exempt foreign entities?

No, exemption from corporate tax in Dubai does not always cancel registration or reporting. Many exempt persons still file returns or notifications, so groups must follow FTA guidance carefully.