UAE: corporate tax exemption to extend to some foreign firms

Business Recorder

21-05-2025

The UAE's Ministry of Finance announced that certain foreign companies will be eligible from corporate tax exemptions.
'The decision expands the scope of the corporate tax exemption to include foreign entities that are wholly owned by certain exempted entities —such as government entities, government-controlled entities, qualifying investment funds, and public pension or social security funds, subject to meeting the relevant conditions,' it said in a press release.
The idea is 'to ensure equal tax treatment between local and foreign entities owned by certain exempt entities,' the ministry explained.
'It also reinforces the UAE's position as an attractive destination for holding companies and reflects the country's commitment to fostering a fair and competitive tax environment in line with international best practices,' it added.
Prior to the issuance of Cabinet Decision No. (55) of 2025, the corporate tax exemption was limited to entities incorporated within the UAE.
Foreign entities, even if wholly owned by certain exempt entities, or even if they operated through branches in the UAE, were not eligible for exemption.
'For investors and businesses, the message is clear: the tax regime may be new, but it's moving in the right direction,' business lawyer Kamal Jabbar told Business Recorder.
He said that the UAE's corporate tax regime is still in its infancy and these latest changes are part of a broader effort to refine how it applies in practice.
'This latest change — extending exemptions to foreign companies fully owned by UAE government entities — ensures these entities aren't penalised simply because their structure is offshore,' he explained.
According to him, waiving penalties and refunding fines shows a clear intent: support compliance, not punish missteps.
'It also signals that the Federal Tax Authority (FTA) is listening and adjusting,' he said, adding that 'on a macro level, corporate tax is not just a revenue tool—it's a catalyst for greater transparency and accountability in the UAE's corporate landscape.'
Three weeks ago, the ministry and the Federal Tax Authority announced an initiative to waive administrative penalties for corporate taxpayers and certain exempt persons who failed to submit their tax registration applications with the FTA within the required timeframe.
'The initiative reaffirms the continued commitment of the Ministry of Finance and the Federal Tax Authority to enhancing the tax compliance environment in the UAE, facilitating procedures, and easing financial burdens on businesses,' it had said at the time.