Entities that are exempt under the law generally fall into three categories: 

1. Automatically Exempt – No approval needed; corporate tax exemption is granted by law. 

2. Conditionally Exempt – Subject to FTA approval and ongoing compliance. 

3. Special Cases – Entities like Free Zone businesses that remain taxable but may benefit from a 0% rate on qualifying income under a specific corporate tax exemption framework. 

 1. Government Entities 

All UAE federal and emirate-level ministries, departments, and public authorities are automatically exempt from corporate tax. These entities carry out sovereign or non-commercial functions and are excluded from the scope of taxation by default. 

For example, a Ministry of Health or a Department of Education managing public services is not subject to corporate tax due to corporate tax exemption granted under the law.  

2. Government-Controlled Entities 

These companies are wholly or partially owned by the government and often operate in strategic sectors. While they may qualify for corporate tax exemption, it is not automatic. To be exempt, the entity must: 

• Be listed in a Cabinet decision, and 

• Operate in areas of national interest, based on recommendations from the Ministry of Finance. 

 3. Extractive Businesses 

Entities engaged in the extraction of natural resources such as oil, gas, or minerals are exempt from federal corporate tax if they are already subject to Emirate-level taxation through concession agreements. Key requirements are: 

• A valid concession agreement with the relevant Emirate authority 

• Separate accounting for taxable and exempt activities 

 4. Non-Extractive Natural Resource Businesses 

Companies involved in the processing or refining of raw natural resources may also qualify for exemption. To be exempt, the business must: 

• Be taxed at the Emirate level, and 

• Operate under a specific legal framework that governs their sector  

5. Qualifying Public Benefit Entities 

These include charities, foundations, and nonprofits serving education, culture, science, religion, and healthcare. To qualify: 

• The entity must be listed by Cabinet decision 

• It must be non-profit in nature, and 

• All income must be used to support its approved charitable purpose 

Note: Any commercial activity must be minimal and incidental to the entity’s core mission.  

6. Pension and Social Security Funds 

Both public and private pension funds may qualify for exemption if they are: 

• Established for the sole purpose of providing retirement or social benefits 

• Recognized by a competent authority, and 

• Approved by the FTA 

 7. Qualifying Investment Funds 

Investment vehicles such as Real Estate Investment Trusts (REITs) and private equity funds can be exempt, provided they meet the following conditions: 

• They are under regulatory oversight by a competent financial authority 

• They have a diverse investor base 

• They are not controlled by a single dominant investor 

FTA approval is mandatory, and the fund must not be primarily set up for commercial purposes. 

 8. Wholly Owned UAE Subsidiaries of Exempt Persons 

A UAE entity that is 100% owned by an exempt person may itself be exempt if it exists solely to undertake activities that support the exempt parent’s function. Example: A logistics or asset management arm wholly owned by a pension fund may be exempt.  

9. Foreign Entities Owned by Exempt Persons 

As per Cabinet Decision No. 55 of 2025, issued on 2 May 2025, the UAE has expanded its corporate tax exemption to include certain foreign juridical persons incorporated outside the UAE, provided these conditions are met: The entity is wholly owned and fully controlled by a qualifying UAE exempt person (e.g. government body, government-controlled entity, investment fund, or pension fund) The foreign entity undertakes one or more of the following: 

• Conduct part or all of the same activities carried out by the exempt UAE parent; 

• Hold assets or invest funds exclusively for the benefit of the exempt parent; or 

• Perform ancillary or supportive activities that serve the exempt parent. 

This corporate tax exemption applies retroactively from 1 June 2023.  

10. Qualifying Free Zone Person (QFZP) 

If a Qualifying Free Zone Person (QFZP) meets all conditions (economic substance, qualifying income, audited accounts, etc.), they pay 0% tax on qualifying income and 9% on non-qualifying income, but subject to the De minimis condition.  Being based in a Free Zone does not automatically mean a full exemption. You remain a taxable person and must comply with all regulatory conditions.  

Maximize Your Tax Advantage with Kitaab 

Kitaab helps UAE businesses navigate corporate tax exemption rules with confidence. Whether you're a Free Zone company aiming for 0% tax, an investment fund evaluating exemption eligibility, or a CFO unsure about Cabinet approvals, we’ll guide you every step of the way. 

Get a compliance checkup with our tax experts and ensure you’re making the most of your corporate tax exemption status.