The UAE has developed a premier global business hub, thanks to its favourable tax rates and streamlined government regulations. The recent move by the UAE’s federal government to introduce corporate tax signals a strategic shift towards global tax compliance, while maintaining the UAE as an investor-friendly environment.
In May 2025, the UAE Ministry of Finance(MoF) announced a notable update by extending corporate tax exemptions in the UAE to qualifying foreign entities owned by UAE resident persons who are Exempt under UAE Corporate Tax, subject to certain specific conditions. The 2025 UAE corporate tax amendment aims to ensure fair corporate tax treatment for all entities, including both local and foreign entities, under the UAE’s corporate tax exemption policy.
Let’s have a close look at this article regarding the impact of the new policy update, who benefits, and how businesses can take advantage of it. Partnering with a top corporate tax consultant in the UAE, Jaxa stands firm with your business in taking the correct steps to qualify for exemption and remain compliant with UAE FTA regulations.
2025 UAE Corporate Tax Exemption Updates: What Businesses Need to Know
Previous Rule Before May 2025
Under the earlier framework, only entities incorporated within the UAE and owned by a specific exempt person, such as UAE Government entities, Qualifying investment funds, Public or private pension funds, were eligible for UAE corporate tax exemption. Foreign entities, even if owned by the exempt person, were excluded from UAE corporate tax exemptions.
Latest Update
The UAE Ministry of Finance enacted Cabinet Decision No. 55 of 2025 on 02nd May, 2025, which extends corporate tax exemptions to certain foreign judicial persons. The decision retroactively applied from 1st June, 2023, allows UAE Corporate Tax Exemption to foreign persons provided they are wholly owned by an exempt person, and they meet the same ownership requirement as a UAE-incorporated business.
This move signals equal tax treatment for UAE and foreign entities owned by exempt entities, reflecting the UAE’s goals of building a fair and transparent tax landscape.
Eligibility Criteria for Exemption under UAE Corporate Tax
Under the UAE Corporate Tax Law, foreign entities can qualify for exemptions if they are entirely owned and controlled by any of the following:
- Government entity
- Government-controlled entities
- Qualifying investment funds
- Public pension and social security funds
- Private pension and social security funds meeting exemption criteria
The above eligible exempt persons are listed in Article 4(1) of the UAE Corporate Tax Law.
Checklist: Qualifying Criteria for Foreign-Owned Entities Under UAE Corporate Tax Law
Under the updated 2025 UAE corporate tax exemption, a foreign judicial person which is wholly owned and controlled by one of the above listed exempt persons must satisfy any of the the following conditions to be eligible for corporate tax exemption under the UAE corporate tax law.
- Similar business activities: The foreign entity participates in equivalent business or related activities performed by the exempt owner.
- Exclusive Asset Holding: The foreign entity must be engaged in holding assets or investing funds for the benefit of the exempt owner to meet this exemption condition under UAE corporate tax law.
- Backend contribution: The foreign entity must only carry out activities that are necessary support services like administration, IT, or logistics that support the business activities of the exempt owner.
The foreign entity must adhere to the conditions set by the UAE FTA and the Ministry of Finance, including accurate registration and timely submissions.
The Significance of the 2025 UAE Corporate Tax Exemption Expansion
- Guarantees fair tax treatment: This new UAE corporate tax exemption update ensures equal tax treatment for UAE-incorporated and foreign entities.
- Draws international business to the UAE: Enhances the UAE’s role in global finance by attracting high-value investors and cross-border business structures.
- Motivates strategic relocation: Encourages foreign entities to establish or expand their decision management presence in the UAE to qualify for the UAE corporate tax exemption.
- Reinforces global tax alignment: Builds international trust by meeting global tax obligations and standards.
This update presents a strategic opportunity for foreign entities to optimize their UAE tax structure, and Jaxa Chartered Accountants, a UAE FTA-certified tax agent, is here to guide you every step of the way.
- Audit Corporate Structure: Evaluate the entity’s ownership and structure to determine whether it aligns with the expanded scope of UAE corporate tax exemptions.
- POEM Compliance check: For fulfilling exemption eligibility, ensure that the company’s strategic and management decisions originate in the UAE.
- Review Alignment with Exemption Conditions: Ensure your business activities align with the exemption criteria of the UAE corporate tax.
- Demonstrate Eligibility Through Documentation: Keep clear records of ownership, control to confirm your alignment with the UAE corporate tax exemption.
Engaging with a certified tax advisor in Dubai will assist you in determining eligibility and ensure compliance with UAE FTA regulations.
With nearly two decades of proven expertise and experience, Jaxa Chartered Accountants is a renowned taxation, accounting, and auditing firm serving clients across the UAE, Dubai, and Abu Dhabi. Our certified UAE FTA tax agent helps clients to stay updated with the UAE’s evolving tax environment. Our certified UAE corporate tax consultant offers various services:
- Explore whether the business is aligned with updated exemption criteria.
- Handles accurate corporate tax filing, timely registration, and proper documentation.
- Ensure adherence to evolving UAE FTA tax regulations
- 100% UAE FTA compliance
- Ensure your POEM meets UAE FTA compliance standards
The update on the UAE’s corporate tax exemption reflects the UAE’s vision to stay globally competitive, with fair and transparent tax practices. The UAE’s new corporate tax exemption framework is a game changer for global entities, and the 0% UAE corporate tax rate is now within reach for eligible foreign-owned entities—don’t miss this opportunity.
Ready to benefit from the UAE’s new corporate tax exemptions? Jaxa is here to lead the way. Contact us today to explore the UAE corporate tax exemption opportunities.
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