UAE Grants Corporate Tax Exemption to Select Foreign-Owned Entities in Landmark Move

New policy aims to align tax treatment between local and foreign-owned entities tied to government bodies, investment funds, and pension systems, reinforcing the UAE’s competitive fiscal environment.

UAE to Exempt Certain Foreign-Owned Entities from Corporate Tax

In a strategic move to enhance tax equity and attract international investment, the United Arab Emirates Ministry of Finance (MoF) has announced a significant expansion of its corporate tax exemption policy. The new decision offers corporate tax exemptions to certain foreign-owned entities that were previously ineligible under the country’s tax framework.

Effective immediately, foreign entities that are wholly owned by specific exempt bodies—including UAE government entities, government-controlled bodies, qualifying investment funds, and public pension or social security funds—will now qualify for corporate tax exemption, provided they satisfy outlined regulatory conditions.

Previously, such foreign entities, even when operating via UAE-based branches or being fully owned by exempt institutions, did not benefit from the corporate tax relief offered to local counterparts.

In a statement shared with Khaleej Times, the MoF said the extension “aims to ensure equal tax treatment between local and foreign entities owned by certain exempt entities.” The ministry emphasized that the change reflects the UAE’s commitment to fostering a “fair and competitive tax environment in line with international best practices.”

The revision is expected to bolster the UAE’s status as a globally attractive jurisdiction for holding companies and cross-border investments.

Thomas Vanhee, partner at Aurifer Middle East Tax Consultancy and affiliate professor of tax law, highlighted the practical importance of the update. “The new regime appropriately realigns the exemption to include UAE entities wholly owned by foreign entities which would be eligible for a tax exemption in the UAE,” he said.

“The previous difference is therefore removed. This is especially relevant for entities held by foreign government entities, foreign funds, or foreign public pension funds,” Vanhee added.

By eliminating the distinction between local and foreign-owned exempt entities, the UAE continues to refine its tax landscape to support sustainable economic growth and international alignment.