UAE Corporate Tax Exemption Explained: Cabinet Decision No. 55 of 2025

Complete UAE Corporate Tax Guide for Foreign-Owned Entities

The UAE Corporate Tax regime has entered a critical phase of clarification and enforcement, making compliance and correct interpretation more important than ever. One of the most significant developments under UAE Corporate Tax law is Cabinet Decision No. 55 of 2025, which provides authoritative guidance on UAE Corporate Tax exemption for foreign-owned entities that are wholly owned by Exempt Persons under Federal Decree-Law No. 47 of 2022.

Although Cabinet Decision No. 55 of 2025 was issued on 2 May 2025, it applies retrospectively from 1 June 2023, the effective date of UAE Corporate Tax. This retrospective application directly impacts Corporate Tax compliance, Corporate Tax registration, and Corporate Tax filing positions for many businesses operating in the UAE through foreign subsidiaries or offshore holding structures.

UAE Corporate Tax Law and the Concept of Exempt Persons

Under Federal Decree-Law No. 47 of 2022 on the Taxation of Corporations and Businesses, UAE Corporate Tax applies to taxable persons unless a specific exemption is available. Article 4 of the UAE Corporate Tax Law defines certain entities as Exempt Persons, meaning they are excluded from UAE Corporate Tax on qualifying income.

Exempt Persons under UAE Corporate Tax law typically include government entities, government-controlled entities, qualifying public benefit organizations, and certain regulated investment and pension funds. While the UAE Corporate Tax exemption for these entities was always clear, ambiguity existed regarding whether foreign-owned entities established by Exempt Persons should also benefit from Corporate Tax exemption. Cabinet Decision No. 55 of 2025 directly resolves this uncertainty.

Purpose and Scope of Cabinet Decision No. 55 of 2025

Cabinet Decision No. 55 of 2025 was issued to ensure consistency and fairness within the UAE Corporate Tax framework. The decision confirms that foreign-incorporated entities may qualify for UAE Corporate Tax exemption, even if they technically fall within the definition of a taxable person, provided strict conditions are met.

From a UAE Corporate Tax advisory perspective, this decision is highly relevant for groups that use foreign special purpose vehicles, foreign holding companies, or offshore investment entities purely to support the activities of UAE Exempt Persons. The decision prevents unintended Corporate Tax exposure where no commercial tax leakage was intended under the law.

Ownership and Control Requirements Under UAE Corporate Tax

A central requirement under Cabinet Decision No. 55 of 2025 is 100 percent ownership and control. The foreign entity must be wholly owned and controlled by an Exempt Person falling under Article 4(1)(a), (b), (f), or (g) of Federal Decree-Law No. 47 of 2022.

For UAE Corporate Tax purposes, ownership must be direct and absolute. Any dilution of ownership, indirect holding, or shared control arrangement may disqualify the entity from UAE Corporate Tax exemption. From a Corporate Tax compliance standpoint, this makes ownership documentation, shareholder registers, and governance records critical in defending exemption status during Federal Tax Authority reviews.

Activity Restrictions for UAE Corporate Tax Exemption

Beyond ownership, UAE Corporate Tax exemption under Cabinet Decision No. 55 of 2025 depends heavily on the nature of activities performed by the foreign entity. The decision limits exempt activities to those that are fully aligned with the Exempt Person’s mandate.

Foreign entities may qualify for UAE Corporate Tax exemption only where they carry out activities on behalf of the Exempt Person, hold assets or invest funds exclusively for the Exempt Person, or perform ancillary and supporting functions that are inseparable from the Exempt Person’s core activities. Engaging in independent commercial operations or generating third-party income may result in full loss of Corporate Tax exemption.

This makes activity mapping and functional analysis a key part of UAE Corporate Tax advisory and compliance services.

Retrospective Impact of UAE Corporate Tax Exemption from 1 June 2023

One of the most critical elements of Cabinet Decision No. 55 of 2025 is its retrospective application from 1 June 2023. From a UAE Corporate Tax compliance perspective, this means businesses must reassess decisions made at the start of the Corporate Tax regime.

Entities may need to review Corporate Tax registrations, evaluate previously filed Corporate Tax returns, and determine whether exemption positions were incorrectly assumed or missed altogether. In some cases, businesses may be eligible for exemption-related corrections or refunds. In others, corrective disclosures may be required to remain compliant with UAE Corporate Tax regulations.

Which Businesses Are Most Affected by This UAE Corporate Tax Clarification?

This Corporate Tax clarification is particularly relevant for government-owned international groups, foreign subsidiaries supporting UAE exempt entities, asset-holding structures, investment vehicles, and public benefit organizations with offshore operations. These structures are common in large UAE groups and require careful Corporate Tax planning and documentation.

The Federal Tax Authority is expected to focus closely on exemption claims, making professional UAE Corporate Tax advisory support essential.

UAE Corporate Tax Compliance and Risk Management Considerations

From a compliance standpoint, businesses must ensure that ownership structures, activity descriptions, and internal documentation are fully aligned with Cabinet Decision No. 55 of 2025. Inadequate documentation, mixed commercial activities, or incorrect Corporate Tax registrations may expose businesses to penalties, audits, or loss of exemption benefits under UAE Corporate Tax law.

Proactive Corporate Tax compliance reviews are now a best practice rather than an option.

How Essence Accounting & Tax Consultancy Supports UAE Corporate Tax Compliance

Essence Accounting & Tax Consultancy is a UAE-based firm specializing in UAE Corporate Tax advisory, Corporate Tax compliance, and Corporate Tax exemption analysis. We assist businesses in interpreting Federal Decree-Law No. 47 of 2022, applying Cabinet Decision No. 55 of 2025, and aligning with Federal Tax Authority expectations.

Our services include Corporate Tax exemption assessments, ownership and control reviews, activity mapping, Corporate Tax registration, return filing, retrospective compliance reviews, and ongoing UAE Corporate Tax advisory support tailored to each client’s structure.

Contact Essence Accounting & Tax Consultancy – UAE Corporate Tax Experts

Essence Accounting & Tax Consultancy
Address: Business Bay, Dubai, United Arab Emirates
Phone: 056 583 4586
Email: info@essenceuae.com
Website: https://www.essenceuae.com

Final SEO Perspective on UAE Corporate Tax Exemption

Cabinet Decision No. 55 of 2025 represents a major clarification within the UAE Corporate Tax regime and significantly impacts foreign-owned entities linked to Exempt Persons. While the UAE Corporate Tax exemption offers substantial benefits, it requires precise compliance, strong documentation, and expert advisory support.

Businesses seeking certainty under UAE Corporate Tax law should act now to review their structures and ensure alignment with Federal Decree-Law No. 47 of 2022 and Cabinet Decision No. 55 of 2025.

For professional UAE Corporate Tax advisory and compliance services, Essence Accounting & Tax Consultancy remains a trusted partner.