Corporate Tax Exemptions in UAE 2026: Complete List and DMTT Deadline Alert

By Tax Falcon UAE | Published: 6 November 2026 | Reading Time: 10 Minutes

Breaking: DMTT Registration Deadline – 30 November 2026

The FTA has confirmed that all UAE entities within multinational groups earning EUR 750 million or more must complete their Pillar Two top-up tax registration on EmaraTax by 30 November 2026.

Late registration attracts an AED 10,000 penalty per entity. Read on to understand how this changes the corporate tax exemption landscape.

If you operate a business in the UAE, one of the most important questions you face in 2026 is: Does my company qualify for a corporate tax exemption?

With the UAE’s corporate tax regime now in its third full year of operation under Federal Decree-Law No. 47 of 2022, the rules around who pays and who is exempt have become more nuanced — especially after the introduction of the Domestic Minimum Top-up Tax (DMTT) under BEPS Pillar Two.

This guide walks you through every corporate tax exemption available in the UAE, the eligibility criteria for each, and the critical new obligation that multinational enterprises must meet before the end of November 2026.

Whether you run a free zone company, a mainland SME, or a subsidiary of a global group, this article gives you the clarity you need to stay compliant and minimise your tax burden legally.

What Is a Corporate Tax Exemption in the UAE?

A corporate tax exemption means that a person or entity is either completely excluded from the UAE corporate tax regime or pays an effective rate of 0% on some or all of their taxable income.

Under the UAE’s CT framework, the standard rates are straightforward:

0% on the first AED 375,000 of taxable income.
9% on taxable income exceeding AED 375,000.

However, several categories of businesses and persons enjoy partial or total relief from these rates.

The key exemption and relief categories in 2026 are:

Exemption / Relief	Who Qualifies	Effective Rate
Exempt Person Status	Government entities, extractive businesses, pension funds and qualifying investment funds	Fully exempt
Qualifying Free Zone Person (QFZP)	Free zone entities meeting substance, de minimis and AUP requirements	0% on qualifying income
Small Business Relief (SBR)	Resident persons with revenue up to AED 3,000,000	0% (elective)
0% Threshold Band	All taxable persons	0% on first AED 375,000
Participation Exemption	5%+ ownership (or AED 4M cost), 12-month holding period and 9%+ tax jurisdiction	Dividends and capital gains exempt

Who Does This Apply To?

Understanding whether your business qualifies for an exemption depends on your legal structure, where you operate, your revenue size, and — crucially since 2025 — whether you are part of a multinational enterprise (MNE) group.

UAE Mainland Companies

Mainland companies are subject to the standard 9% rate on taxable income above AED 375,000 unless they qualify for Small Business Relief or fall within an exempt category.

Free Zone Companies

Free zone companies may elect for QFZP status and benefit from 0% corporate tax on qualifying income, provided they meet the conditions set out in Cabinet Decision No. 55 of 2023 and maintain adequate substance in the free zone.

Multinational Group Subsidiaries

Since 1 January 2025, UAE entities belonging to MNE groups with consolidated revenue of EUR 750 million or more are subject to the Qualified Domestic Minimum Top-up Tax (QDMTT) under Cabinet Decision No. 142 of 2024.

This effectively raises their minimum effective tax rate to 15%, regardless of any other exemption they might hold — including QFZP status.

Natural Persons

Natural persons with UAE business turnover exceeding AED 1,000,000 per year are subject to corporate tax under Cabinet Decision No. 49 of 2023, but may still qualify for Small Business Relief if total revenue stays within AED 3,000,000.

Key Rules and Requirements

1. Exempt Persons – Full Exclusion from Corporate Tax

Certain entities are entirely excluded from the UAE corporate tax net.

Under Articles 4 and 5 of Federal Decree-Law No. 47 of 2022, the following qualify as Exempt Persons:

Government Entities and Government-Controlled Entities

Entities listed by Cabinet Decision that perform sovereign functions or activities that are an extension of the government.

Extractive Businesses

Businesses engaged in the exploration and production of UAE natural resources that are already subject to emirate-level taxation on their upstream activities.

Qualifying Public Benefit Entities

Entities listed by the Cabinet.

Qualifying Investment Funds

Funds that meet conditions set by the FTA, including diversified ownership, regulatory oversight, and annual distribution or redemption requirements.

Public and Private Pension or Social Security Funds

Funds regulated by competent authorities.

These persons must still apply to the FTA for formal exempt status. Simply belonging to one of these categories does not automatically confer the exemption — the FTA must confirm it.

2. Qualifying Free Zone Person (QFZP) – 0% on Qualifying Income

Free zone entities that elect QFZP status enjoy a 0% corporate tax rate on their qualifying income. However, the conditions are strict.

Adequate Substance

The entity must maintain adequate substance in the free zone, including employees, premises, and core income-generating activities conducted within the zone.

Qualifying Income

The entity must derive qualifying income as defined in Cabinet Decision No. 55/2023. This generally includes income from transactions with other free zone persons and certain specified activities such as manufacturing, logistics and distribution.

De Minimis Rule

Revenue from domestic mainland transactions or excluded activities is taxed at the standard 9% rate.

Critically, the de minimis rule states that if non-qualifying revenue exceeds the lower of AED 5,000,000 or 5% of total revenue, the entity loses its entire QFZP status for that tax period.

AUP Report Requirement

Under FTA Decision No. 6 of 2026, QFZPs distributing revenue between qualifying and other activities must submit an Agreed-Upon Procedures (AUP) Report, prepared under ISRS 4400 Revised, within 30 days of filing their CT return.

The sampling methodology requires a minimum of 10 transactions with a 95% confidence level and 10% margin of error.

3. Small Business Relief – 0% for Micro and Small Enterprises

Resident taxable persons with revenue up to AED 3,000,000 in a tax period may elect for Small Business Relief under Article 21 of the CT Law.

When elected, the person is treated as having no taxable income, resulting in an effective 0% rate.

Key Points to Remember:

SBR is an annual election, not an automatic status.
Businesses must still register for corporate tax and file a return.
They declare zero taxable income on the return when making the election.
SBR is not available to members of multinational groups or to QFZPs.

4. Participation Exemption – Dividends and Capital Gains

Under Ministerial Decision No. 302 of 2024, effective 1 January 2025, the participation exemption relieves corporate tax on dividends and capital gains from qualifying shareholdings.

To qualify, the participating interest must meet three tests:

Ownership Test

At least 5% of the shares or an acquisition cost of at least AED 4,000,000.

Holding Period

The interest must be held continuously for at least 12 months.

Subject-to-Tax Test

The entity whose shares are held must be subject to corporate tax at a rate of 9% or more.

When all three conditions are met, dividends, capital gains and losses, foreign exchange gains and losses, and impairment gains and losses from the participating interest are exempt from UAE corporate tax.

5. The DMTT Game-Changer: Pillar Two Top-up Tax

This is the development every UAE business connected to a large multinational group must understand.

Cabinet Decision No. 142 of 2024 introduced the UAE’s Qualified Domestic Minimum Top-up Tax (QDMTT), implementing BEPS Pillar Two.

Here is what you need to know:

Scope

The QDMTT applies to UAE constituent entities of MNE groups with consolidated revenue of EUR 750 million or more in at least two of the four preceding fiscal years.

This threshold is measured at the Ultimate Parent Entity level, not based on the UAE subsidiary’s standalone turnover.

A small UAE office with modest revenue can be fully in scope through its global group.

Minimum Rate

The QDMTT ensures that profits earned in the UAE by in-scope entities face an effective tax rate of at least 15%.

If the computed effective tax rate on UAE operations falls below 15%, a top-up tax is levied to bring it to that floor.

Impact on QFZP Status

A free zone entity that enjoys 0% on qualifying income under QFZP status will still face a top-up tax under QDMTT if its MNE group is in scope.

The 0% rate is maintained at the CT level, but the DMTT applies on top to reach the 15% minimum.

In practical terms, large MNE groups cannot shelter UAE profits through QFZP status alone.

Substance-Based Exclusion

The QDMTT allows a deduction from excess profit equal to:

5% of eligible payroll costs.
5% of the carrying value of eligible tangible assets located in the UAE.

This rewards genuine economic substance.

De Minimis Exclusion

If UAE revenue is below EUR 10 million AND UAE income or loss is below EUR 1 million, the top-up tax is deemed zero under the de minimis safe harbour.

Critical Deadline – 30 November 2026

Under FTA Decision No. 12 of 2026, all in-scope UAE entities must register for the top-up tax on the EmaraTax portal by 30 November 2026 if their first relevant fiscal year ended before 30 April 2026.

For entities whose first in-scope year ends after that date, registration is due within seven months of fiscal year-end.

Late registration attracts a penalty of AED 10,000 per entity.

If a Domestic Designated Filing Entity (DDFE) fails to register for five entities, the combined penalty could reach AED 50,000.

Entities must register even if the calculated top-up tax is zero.

Being in scope with a zero tax outcome is not the same as being out of scope entirely — the FTA confirmed this at its 3 November 2026 webinar.

Step-by-Step Guide to Determining Your Exemption Status

Step 1 – Classify Your Entity

Determine whether you are a juridical person, a natural person, or a branch. Identify whether you operate on the mainland, in a free zone, or both.

Step 2 – Check for Exempt Person Status

If your entity is a government body, extractive business, pension fund, or qualifying investment fund, apply to the FTA for exempt status. If approved, you are outside the CT regime entirely.

Step 3 – Assess QFZP Eligibility (Free Zone Entities)

Verify that you maintain adequate substance, derive qualifying income, and fall within the de minimis thresholds. If eligible, elect QFZP status in your CT return.

Step 4 – Consider Small Business Relief (Mainland SMEs)

If your total revenue is at or below AED 3,000,000 and you are not part of an MNE group, elect SBR in your CT return to achieve 0% taxable income.

Step 5 – Check Pillar Two Exposure

If your company belongs to an MNE group, determine whether the group’s consolidated revenue exceeds EUR 750 million in at least two of the four preceding fiscal years.

If yes, register for QDMTT on EmaraTax immediately — the 30 November 2026 deadline is approaching.

Step 6 – Apply the Participation Exemption

For holding companies or entities with qualifying shareholdings, verify that your investments meet the 5% / AED 4M ownership, 12-month holding, and 9% subject-to-tax tests to exempt dividends and capital gains.

Step 7 – File Correctly

Even if you qualify for an exemption or relief, you must still register for corporate tax, file your CT return within 9 months of fiscal year-end, and maintain proper records for a minimum of 7 years.

Common Mistakes to Avoid

1. Assuming Free Zone Means Fully Exempt

QFZP status does not mean zero tax on everything. Revenue from mainland transactions is taxed at 9%, and if non-qualifying revenue exceeds the de minimis threshold, you lose QFZP status entirely for that period.

2. Ignoring the DMTT Because Your UAE Subsidiary Is Small

The EUR 750 million test looks at the global group, not the UAE entity. A one-person UAE representative office of a Fortune 500 company is in scope.

3. Treating SBR as Automatic

Small Business Relief must be actively elected in each CT return. If you forget to elect, you are taxed at the standard rate.

4. Missing the AUP Report Deadline for QFZPs

The AUP Report must be submitted within 30 days of filing your CT return. Missing this can result in the FTA reclassifying your income.

5. Not Registering for QDMTT Because Your Top-up Tax Is Zero

The FTA requires registration even if the calculated top-up is nil. Failing to register attracts the AED 10,000 penalty regardless.

6. Forgetting Transitional Relief Elections

Under Ministerial Decision No. 120/2023 and Article 61 of the CT Law, the election to revalue pre-CT era assets must be made in your first CT return — it cannot be claimed retrospectively.

If your first return has already been filed without the election, the opportunity is permanently lost.

How Tax Falcon Can Help

At Tax Falcon UAE, we are an FTA-approved tax advisory firm (Reg. No. 20056800) based in Abu Dhabi with deep expertise across every corporate tax exemption and relief mechanism available in the UAE.

Our services include:

Exemption Eligibility Assessment

We review your entity structure, revenue streams, and group connections to identify exactly which exemptions and reliefs you qualify for.

QFZP Compliance

From substance testing to AUP report preparation, we ensure your free zone entity maintains its 0% status without surprises at audit.

Pillar Two / DMTT Registration and Compliance

With the 30 November 2026 deadline approaching, we help MNE groups map their UAE entities, classify them correctly, appoint a DDFE, and complete EmaraTax registration before the penalty clock starts.

Small Business Relief Elections

We prepare your CT return with the SBR election properly documented, ensuring you pay nothing on revenue up to AED 3 million.

Participation Exemption Structuring

For holding companies and investment vehicles, we verify your shareholdings meet all three tests and document the exemption claim.

Frequently Asked Questions

Is a UAE free zone company fully exempt from corporate tax?

No. A free zone company can benefit from 0% corporate tax on qualifying income if it elects and maintains Qualifying Free Zone Person (QFZP) status.

However, income from mainland transactions is taxed at 9%, and non-qualifying income that breaches the de minimis threshold can disqualify the entire QFZP election.

Additionally, if the free zone company belongs to an MNE group within Pillar Two scope (EUR 750M+), a top-up tax may apply to bring the effective rate to 15%.

What is the DMTT registration deadline and who must register?

Under FTA Decision No. 12 of 2026, the first DMTT registration deadline is 30 November 2026 for entities whose first in-scope fiscal year ended before 30 April 2026.

All UAE constituent entities of multinational groups with EUR 750 million or more in consolidated revenue (in at least two of four preceding years) must register — even if their calculated top-up tax is zero.

Can I claim both QFZP status and Small Business Relief?

No. Small Business Relief is not available to Qualifying Free Zone Persons. You must choose one or the other.

For most free zone entities with qualifying income, QFZP status is more beneficial since SBR is capped at AED 3 million revenue.

What happens if I miss the DMTT registration deadline?

Late registration attracts an administrative penalty of AED 10,000 per entity.

If you use a Domestic Designated Filing Entity (DDFE) and it fails to register for multiple entities, the penalty applies to each one individually.

The FTA will not deregister an entity until all outstanding top-up tax and penalties are paid.

Does the participation exemption apply to foreign dividends?

Yes, provided the three conditions under Ministerial Decision No. 302 of 2024 are met:

At least 5% ownership (or AED 4 million acquisition cost).
Continuous 12-month holding.
The foreign entity being subject to corporate tax at 9% or more.

This exempts dividends, capital gains, FX gains/losses, and impairment gains/losses from the participating interest.

Need Help With Your Corporate Tax Exemption?

The 30 November 2026 DMTT deadline is fast approaching.

Whether you need to assess QFZP eligibility, register for Pillar Two, or elect Small Business Relief, Tax Falcon’s FTA-approved advisors are ready to help.

Contact Tax Falcon UAE