Who is Exempt from Corporate Tax in the UAE?
The UAE’s introduction of corporate tax from June 1, 2023, was a historic shift in the country’s tax landscape. While many businesses are now subject to a 9% tax on profits exceeding AED 375,000, several entities still qualify for exemptions under the new law.
This guide explains who is exempt from corporate tax in the UAE, with a special focus on Free Zone entities, small businesses, and government organizations. If you’re navigating this change, understanding the exemptions can save you from costly mistakes—and that’s where professional support from top accounting firms in Dubai becomes essential.
What is Corporate Tax in the UAE?
Corporate tax applies to business profits in the UAE. The structure is as follows:
- 0% on taxable income up to AED 375,000
- 9% on income above that threshold
- 15% top-up for multinationals with global revenues above €750 million (OECD Pillar Two)
Even though corporate tax is here to stay, some businesses can still legally avoid paying it, provided they meet specific criteria.
Who Qualifies for Corporate Tax Exemption in the UAE?
Qualifying Free Zone Persons
Free zone businesses are not automatically exempt, but they can enjoy a 0% corporate tax rate if they meet all of the following:
- Earn only qualifying income (e.g., export services, inter-free-zone trade)
- Do not conduct business with UAE mainland clients
- Maintain adequate economic substance in the UAE
- Their non-qualifying income must not exceed 5% of total revenue or AED 5 million
To confirm your compliance status, you’ll need expert reviews and audits—this is where internal audit services in the UAE are critical.
Small Business Relief (SBR)
Businesses with revenues up to AED 3 million may opt for Small Business Relief (valid from 2023–2026). Benefits include:
- 0% Corporate Tax
- No requirement to pay or file a return
- Still must maintain basic financial records
Working with a bookkeeping service ensures you track income correctly and avoid missing out on this benefit.
Government Entities & Public Benefit Organizations
These include:
- UAE government departments
- Qualifying non-profit organizations
- Charities and foundations approved by the Cabinet
They’re automatically exempt and do not need to register.
Pension & Investment Funds
To qualify for exemption, these must:
- Be licensed and regulated by UAE authorities
- Apply for approval from the Federal Tax Authority (FTA)
- Maintain transparent accounting and audit records
Don’t Assume You're Exempt
Many businesses mistakenly assume that being in a Free Zone equals tax-free status. That’s no longer the case under the UAE Corporate Tax Law.
Here’s what you still must do even if you qualify for 0% tax:
- Register with the FTA
- File returns annually
- Maintain records for at least 7 years
- Submit audited financial statements
That’s why most firms now rely on auditing & accounting firms in Dubai to manage compliance and avoid steep penalties.
Why Work with Experts for Corporate Tax Exemption?
Navigating UAE tax law without expert help can cost you. Here’s how professionals add value:
Service | Why It Matters |
Top Accounting Firms in Dubai | Offer full tax planning and structuring |
Internal Audit Services in UAE | Ensure you meet economic substance rules |
Accounting and Bookkeeping Services | Help track qualifying income accurately |
VAT Services in Dubai | Ensure dual compliance with VAT + Corporate Tax |
Final Thoughts
Exemptions from UAE Corporate Tax are real—but not automatic. Whether you’re operating in a Free Zone or running a small business, smart compliance starts with expert guidance. At TFAB, we specialize in VAT services, internal audits, and accounting in Dubai—helping businesses navigate tax laws and confidently claim the exemptions they’re entitled to. Ready to ensure your business is compliant and tax-efficient? Contact TFAB today for a personalized consultation.
Frequently Asked Questions
No. Only Qualifying Free Zone Persons are eligible for the 0% corporate tax rate. To qualify, the company must earn only qualifying income, maintain adequate economic substance in the UAE, and avoid direct business with the mainland. Non-compliance may result in full 9% taxation.
Yes. Even if your business qualifies for exemption, registration with the Federal Tax Authority (FTA) is mandatory. All businesses must obtain a Corporate Tax Registration Number and maintain proper financial records.
Small Business Relief (SBR) offers 0% corporate tax to businesses with annual revenue up to AED 3 million, applicable from 2023 to 2026. Eligible businesses are still required to register, maintain records, and confirm eligibility each year.