Is a holding company subject to Corporate Tax?

Answered by TI from the Federal Tax Authority’s own law · 15 September 2026. Guidance, not tax advice: rely on the official text.

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It depends on whether the holding company meets the conditions for the Participation Exemption. If it does, its dividends and gains from qualifying shareholdings are exempt from Corporate Tax; if not, that income is taxable.

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The detail

The sources do not state a general rule that a holding company is a taxable person, but they address the exemption of its participation income. Under the Participation Exemption (Article 23 of the Corporate Tax Law, as explained in the FTA guide), a holding company can treat its income from Participating Interests as exempt if it satisfies two conditions: (1) its principal objective and activity is acquiring and holding investments that meet the Participating Interest conditions, and (2) its income substantially consists of income from those Participating Interests. If the holding company is not a Qualifying Free Zone Person or Exempt Person, it is otherwise subject to Corporate Tax on its income.1

What the law says

A holding company is treated as having satisfied the 'subject to tax test' for the Participation Exemption only if its principal objective and activity is the acquisition and holding of investments that meet the conditions of a Participating Interest, and its income substantially consists of income from those Participating Interests.1 Based on FTA guidance
For the subject to tax test, a Participation that is a Qualifying Free Zone Person under Article 18 of the Corporate Tax Law, or an Exempt Person under Article 4, is deemed to have satisfied the test.1 Based on FTA guidance

What it depends on

The holding company must be directed and managed in the relevant foreign country (interpreted by place of effective management) to meet the 'principal objective' condition.1 Based on FTA guidance
The holding company's income must substantially consist of income from Participating Interests.1 Based on FTA guidance

Check before you rely on it

Check that your holding company's principal objective is the acquisition and holding of investments that qualify as Participating Interests.
Verify that the bulk of your income comes from those Participating Interests, not from other trading activities.

Note: This answer only covers the participation exemption rules from the supplied sources; the general rule that a resident juridical person is subject to Corporate Tax (in the absence of an exemption) is not covered by these extracts.

Sources (1) — read the official text

1Exempt Income: Dividends and Participation ExemptionFTA guidance

Read the article
Dividends from a Free Zone Person, as a juridical person that is a Resident Person in the UAE, would be automatically exempt, so the following is relevant in respect of Qualifying Free Zone Persons for income other than Dividends and other profit distributions. For the purpose of the subject to tax test, a Participation that is a Qualifying Free Zone Person under Article 18 of the Corporate Tax Law, or an Exempt Person under Article 4 of the Corporate Tax Law, is deemed to satisfy the subject to tax test.73 In case a Participation ceases to be a Qualifying Free Zone Person or an Exempt Person during a Tax Period, there would be no practical impact on the subject to tax test as described in Section 5.5, as the Participation would then become subject to UAE Corporate Tax which would satisfy the subject to tax test.74 5.6.2. Holding companies Holding companies are treated as having satisfied the subject to tax test if both of the following conditions are met:75 • • The principal objective and activity of the holding company is the acquisition and holding of investments that also meet the conditions of Participating Interest.76 The income of the holding company substantially consists of income from the Participating Interests.77 5.6.2.1. Intention of holding of investments The following conditions must be met by a holding company to be considered that its principal objective is the acquisition and holding of shares or equitable interests:78 • Be directed and managed in the relevant other country or foreign territory.79 This condition should be interpreted in view of the concept of place of effective management. This is where the most senior person or group of persons (for example board of directors) make key management and commercial decisions, 73 Article 23(4) of the Corporate Tax Law. 74 Article 4(5) and Article 18(2) of the Corporate Tax Law. 75 Article 23(3) of the Corporate Tax Law. 76 Article 23(3)(a) of the Corporate Tax Law. 77 Article 23(3)(b) of the Corporate Tax Law. 78 Article 7(1) of Ministerial Decision No. 116 of 2023. 79 Article 7(1)(a) of the Ministerial Decision No. 116 of 2023. Corporate Tax Guide | Exempt Income: Dividends and Participation Exemption | CTGEXI1 42

Official PDF, p. 43Captured from the FTA website on 8 Sep 2026

Helpful?

What the law says:
- A holding company is treated as having satisfied the 'subject to tax test' for the Participation Exemption only if its principal objective and activity is the acquisition and holding of investments that meet the conditions of a Participating Interest, and its income substantially consists of income from those Participating Interests. [1]
- For the subject to tax test, a Participation that is a Qualifying Free Zone Person under Article 18 of the Corporate Tax Law, or an Exempt Person under Article 4, is deemed to have satisfied the test. [1]

What it depends on:
- The holding company must be directed and managed in the relevant foreign country (interpreted by place of effective management) to meet the 'principal objective' condition. [1]
- The holding company's income must substantially consist of income from Participating Interests. [1]

Check before you rely on it:
- Check that your holding company's principal objective is the acquisition and holding of investments that qualify as Participating Interests.
- Verify that the bulk of your income comes from those Participating Interests, not from other trading activities.

Note: This answer only covers the participation exemption rules from the supplied sources; the general rule that a resident juridical person is subject to Corporate Tax (in the absence of an exemption) is not covered by these extracts.

Sources:
1. Exempt Income: Dividends and Participation Exemption — p. 43

Written by AI from the FTA sources above and checked before display. Not tax advice or official FTA information - confirm with a tax adviser before you act. Full disclaimer

Is a holding company subject to Corporate Tax?

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What the law says

What it depends on

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