Cabinet Decision No. 55 of 2025 Explained

UAE Corporate Tax Exemption for Certain Foreign-Owned Entities under Federal Decree-Law No. 47 of 2022

The UAE Corporate Tax framework continues to develop through targeted Cabinet Decisions that clarify the application of Federal Decree-Law No. 47 of 2022 on the Taxation of Corporations and Businesses. One of the most important clarifications in this evolving framework is Cabinet Decision No. 55 of 2025, issued on 2 May 2025 and effective retrospectively from 1 June 2023.

This Cabinet Decision, as published by the Ministry of Finance, provides explicit legal guidance on exempting certain persons from UAE Corporate Tax, particularly focusing on foreign-incorporated taxable persons that are wholly owned and controlled by Exempt Persons. Although the text is not an official translation, it reflects the legal intent and practical application of the exemption provisions under UAE Corporate Tax law.

Legal Basis and Authority of Cabinet Decision No. 55 of 2025

Cabinet Decision No. 55 of 2025 is issued pursuant to the UAE Constitution and Federal Decree-Law No. 47 of 2022, including its subsequent amendments. The decision was issued based on the proposal of the Minister of Finance and approved by the UAE Cabinet, reinforcing its authority within the UAE Corporate Tax legal framework.

From a UAE Corporate Tax compliance perspective, this decision carries the same binding effect as other Cabinet Decisions issued under the Corporate Tax law and must be considered when assessing exemption eligibility, Corporate Tax registration requirements, and filing obligations.

Article 1 – Definitions under UAE Corporate Tax Law

Article 1 of Cabinet Decision No. 55 of 2025 confirms that all definitions used in this decision shall follow the meanings assigned to them under Federal Decree-Law No. 47 of 2022. This ensures consistency across the UAE Corporate Tax regime and eliminates interpretational conflicts between the law and subsidiary legislation.

For Corporate Tax advisory purposes, this means that terms such as Taxable Person, Exempt Person, Corporate Tax, and Control must be interpreted strictly in accordance with the primary Corporate Tax law when applying this decision.

Article 2 – Exemption from Corporate Tax for Certain Foreign Entities

Article 2 is the core provision of Cabinet Decision No. 55 of 2025 and directly addresses the Corporate Tax exemption for foreign-incorporated taxable persons. The decision provides that a Taxable Person incorporated or established under the laws of a foreign jurisdiction may be exempt from UAE Corporate Tax if specific ownership and activity conditions are satisfied.

This exemption applies specifically for the purposes of Article 4(1)(i) of Federal Decree-Law No. 47 of 2022 and is limited to foreign entities that are wholly owned and controlled by Exempt Persons identified under Article 4(1)(a), (b), (f), and (g) of the Corporate Tax law.

Ownership and Control Requirement under UAE Corporate Tax

A fundamental condition for exemption under Cabinet Decision No. 55 of 2025 is that the foreign entity must be 100 percent wholly owned and controlled by an Exempt Person. Ownership must be direct and absolute, and control must be demonstrable through governance, voting rights, and decision-making authority.

From a UAE Corporate Tax compliance standpoint, any deviation from full ownership or exclusive control may disqualify the foreign entity from exemption. This makes ownership structure analysis, legal documentation, and corporate governance records critical for exemption eligibility and Federal Tax Authority scrutiny.

Permitted Activities for Corporate Tax Exemption

In addition to ownership, the foreign entity must restrict its activities strictly to those permitted under Article 2 of the decision. The Cabinet Decision clearly outlines three categories of acceptable activities that allow the foreign entity to maintain Corporate Tax exemption.

First, the foreign entity may undertake part or the whole of the activities of the Exempt Person, meaning it operates as an extension or functional arm of the exempt entity. Second, the foreign entity may be engaged exclusively in holding assets or investing funds for the benefit of the Exempt Person, without conducting independent commercial operations. Third, the entity may perform ancillary or supporting activities that are directly connected to the activities carried out by the Exempt Person.

Any activity outside these narrowly defined parameters, including independent trading, third-party service provision, or unrelated income generation, may invalidate the Corporate Tax exemption.

Article 3 – Publication and Effective Date

Article 3 confirms that Cabinet Decision No. 55 of 2025 shall be published in the Official Gazette and is effective from 1 June 2023, aligning its application with the commencement of the UAE Corporate Tax regime.

The retrospective nature of this effective date has significant implications for Corporate Tax compliance. Businesses must assess whether foreign entities within their group structure should have been treated as exempt from the start of Corporate Tax and whether corrective actions, amendments, or documentation updates are required.

Practical UAE Corporate Tax Implications for Businesses

From a practical perspective, Cabinet Decision No. 55 of 2025 provides clarity but also imposes responsibility. Businesses with foreign subsidiaries owned by UAE Exempt Persons must now carefully review ownership structures, operational activities, and historical Corporate Tax positions.

Failure to properly assess eligibility or maintain sufficient documentation may expose businesses to Corporate Tax risks, including incorrect filings, penalties, or challenges from the Federal Tax Authority. Conversely, businesses that qualify may benefit from reduced tax exposure and improved compliance certainty.

How Essence Accounting & Tax Consultancy Assists with UAE Corporate Tax

Essence Accounting & Tax Consultancy provides specialized UAE Corporate Tax advisory and compliance services, helping businesses interpret and apply Cabinet Decisions such as Cabinet Decision No. 55 of 2025 correctly and defensibly.

Our services include exemption eligibility analysis, ownership and control reviews, activity mapping, Corporate Tax registration and filing support, retrospective compliance assessments from 1 June 2023, and ongoing advisory aligned with Federal Tax Authority requirements.

Contact Essence Accounting & Tax Consultancy

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 and Compliance Perspective

Cabinet Decision No. 55 of 2025 plays a crucial role in defining the scope of UAE Corporate Tax exemption for foreign-owned entities under Federal Decree-Law No. 47 of 2022. While the exemption provides meaningful relief, it is conditional, documentation-driven, and subject to strict interpretation.

Businesses should act promptly to review their structures, confirm eligibility, and ensure full compliance with UAE Corporate Tax law. Professional advisory support is essential to navigate these requirements effectively and avoid unnecessary risk.

For expert guidance on UAE Corporate Tax exemptions, compliance, and advisory, contact Essence Accounting & Tax Consultancy.