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Corporate Tax

Exempt Entities Under Corporate Tax in UAE

Under the UAE's Corporate Tax Law, certain organizations are completely exempt from corporate tax. It is vital to distinguish this from being subject to a 0% tax rate.

An Exempt Person is entirely outside the corporate tax system and generally does not need to register or file returns. A Taxable Person is inside the system and must register and file, even if they pay no tax due to the 0% rate on income up to AED 375,000 or through a special status like a Qualifying Free Zone Person.

Categories of Exempt Entities

Exemptions are granted to organizations that serve a public function or are already subject to other specific tax regimes. They fall into two main types: those exempt automatically and those requiring an application or official listing.

Automatic Exemptions

These entities are exempt by their nature without needing to apply to the Federal Tax Authority (FTA).

  • Government Entities: The Federal Government, Emirate Governments, and all their departments, agencies, and public institutions are exempt.
  • Government-Controlled Entities: Companies that are wholly owned and controlled by a government entity are exempt, provided they are listed in a Cabinet Decision.
  • Natural Resource Businesses: Businesses engaged in the extraction and exploitation of the UAE's natural resources (like oil, gas, and stone) are not subject to the federal corporate tax. Instead, they are typically taxed at the Emirate level.

Exemptions Requiring Application or Listing

These entities must meet specific conditions and either be listed in a Cabinet Decision or apply for and receive approval from the FTA.

  • Qualifying Public Benefit Entities: These are non-profit organizations established for religious, charitable, scientific, educational, or cultural purposes. To be exempt, they must be listed in Cabinet Decision No. 37 of 2023 and operate exclusively for public welfare without distributing profits.
  • Qualifying Investment Funds: An investment fund, including its investment vehicles, can apply to the FTA for an exemption. Therefore, it must satisfy strict conditions related to its regulation, investor base, and primary activities.
  • Public or Private Pension and Social Security Funds: These funds are also eligible for an exemption upon application to the FTA, subject to conditions specified in Ministerial Decision No. 115 of 2023.

Exemption vs. 0% Tax Rate: A Clear Comparison

Confusing these statuses is a common mistake. This table shows the main differences.

Feature Exempt Person Qualifying Free Zone Person (QFZP) Regular Business (Taxable Income < AED 375k)
Status Outside the Corporate Tax system Inside the Corporate Tax system Inside the Corporate Tax system
Tax Registration Not Required Required Required
Tax Return Filing Not Required Required Required
Tax Rate N/A 0% on Qualifying Income, 9% on other income 0% on first AED 375,000 of taxable income
Example A listed charity, a government ministry A Free Zone company meeting all QFZP conditions A mainland LLC with AED 200,000 annual profit

FAQs About Exempt Entities

What is the main condition for a Public Benefit Entity to be exempt?

The entity must be listed in the relevant Cabinet Decision and operate for public welfare without distributing profits to its members or shareholders.

Are exempt entities also exempt from Value Added Tax (VAT)?

No. The corporate tax exemption is separate from VAT. For instance, an exempt entity may still be required to register for and pay VAT if it makes taxable supplies that exceed the VAT registration threshold.

Can a foreign organization be considered an exempt person?

Generally, exemption applies to UAE-based entities. A foreign company is only subject to UAE corporate tax if it has a permanent establishment in the UAE or derives state-sourced income.