Some income is exempt from UAE Corporate Tax, which avoids taxing the same profit twice.
Key facts from the law
Dividends and profit distributions received from a Resident juridical person are exemptCorporate Tax Law, Art. 22
Participation exemption - income from a Participating Interest (5% or more, held for 12 months, subject to tax at not less than the Art. 3(1)(b) rate) is exemptCorporate Tax Law, Art. 23
Each point is checked against the text of the law or FTA guide held by TI.
Dividends from a UAE company are never taxed. Dividends from a foreign company are only tax-free if you hold at least 5% of it for 12+ months and it's taxed abroad at a comparable rate - otherwise they're added to your taxable income.
Dividends and other profit distributions received from a UAE Resident Person are excluded from Taxable Income (Article 22(1)).
Dividends from a Participating Interest in a foreign juridical person are exempt only where the Participation Exemption conditions of Article 23 are satisfied (Article 22(2)/23).
FTA guidance confirms a UAE-resident dividend is exempt automatically, while a foreign dividend not meeting the Participation Exemption is taxable. Based on FTA guidance
It's a tax break that lets a UAE company ignore dividends and capital gains from a significant shareholding (5% or more) in another company, so that income isn't taxed twice. To qualify, you must meet ownership, holding-period and tax-rate conditions on the investee company.
Article 23(1)-(2) exempts income from a Participating Interest where the 5% ownership, 12-month holding, minimum tax rate, and profit/liquidation entitlement conditions are all satisfied.
Article 23(5) lists the specific exempt income items: foreign dividends/distributions, gains/losses on disposal, FX gains/losses and impairment gains/losses on the Participating Interest.
Ministerial Decision No. 302 of 2024, Article 12, limits the exemption to income received in the capacity of owner of the interest; income earned in any other capacity is not exempt.
Dividends from a foreign company are tax-free only if you hold at least 5% (or spent at least AED 4 million on the stake), have held it for 12 months, and the foreign company itself pays a comparable tax at 9% or more. Dividends from a UAE-resident company are always tax-free, no conditions needed.
Dividends from a Resident Person are exempt from Corporate Tax with no additional conditions under Article 22(1).
Dividends from a foreign Participation are exempt under Article 22(2) only if the Participating Interest conditions in Article 23(2) are all met.
FTA guidance confirms the 5% ownership test can alternatively be met by an aggregate acquisition cost of AED 4 million or more, and explains the subject-to-tax test as a 9% headline or effective rate. Based on FTA guidance
Generally yes, capital gains are treated as normal business income and taxed at the standard Corporate Tax rate. But if the gain comes from selling a qualifying shareholding (5%+ held for 12+ months, meeting other conditions), it can be exempt - you'd need to check if your shareholding qualifies.
Gains on transfer, sale or other disposition of a Participating Interest are excluded from Taxable Income where the conditions of Article 23(2) continue to be met.
Where the ownership interest falls below 5% before completing 12 uninterrupted months, previously exempted income is brought back into Taxable Income in that Tax Period.
The exemption does not apply to a loss realised on liquidation of a Participation, and is restricted where a deductible impairment loss was previously claimed on the interest.
Yes. Interest income you earn is normally included in your taxable profit for Corporate Tax purposes, unless it falls under a specific exemption such as the participation exemption for qualifying shareholdings.
Under Article 30(2) of the Corporate Tax Law, Net Interest Expenditure is the amount by which interest expenditure exceeds taxable interest income for the Tax Period.
Under Article 12 of Ministerial Decision No. 302 of 2024 (and the equivalent Article 11 of Ministerial Decision No. 116 of 2023), only income received by a Taxable Person in its capacity as owner of an ownership interest in a Participation is exempt; income received in any other capacity, including ordinary interest, is not exempt.
Guidance only, not tax advice. Answers were drafted by TI from the FTA’s published law and last updated on 25 September 2026; rely on the official text and a registered tax agent before you file.