Relocating to the UAE: Guide to UAE Tax Free Income and Corporate Tax Relief

Tax Free Income

An entity can enjoy tax free income if the following conditions are met:

• It is a qualified free zone person

• It conducts qualifying services

• It is specifically excluded from taxation by the FTA

• It meets specific definitions of tax free income (sources of income are tax free)

Lets dive in these categories:

A. Qualifying Free Zone Person

If an entity is classified a “Qualifying Free Zone Person” then this person will be exempted from Corporation Tax.

 

What is a Qualifying Free Zone Person?

To be treated as a “Qualifying Free Zone Person”, the Free Zone entity must:

1. Maintain adequate substance in the UAE;

2. Derive “Qualifying Income” as specified in a Cabinet Decision;

3. Comply with transfer pricing rules and maintain the relevant transfer pricing documentation; and

4. Not have made an election to be subject to CT in full.


B. Qualifying Activities Performed

a. Manufacturing of goods or materials.

b. Processing of goods or materials.

c. Trading of Qualifying Commodities.

d. Holding of shares and other securities for investment purposes.

e. Ownership, management and operation of Ships.

f. Reinsurance services.

g. Fund management services.

h. Wealth and investment management services.

i. Headquarter services to Related Parties.

j. Treasury and financing services to Related Parties.

k. Financing and leasing of Aircrafts.

l. Distribution of goods or materials in or from a Designated Zone.

m. Logistics services.

n. Any activities that are ancillary to the Qualifying Activities specified in paragraphs (a) to (m) of this Clause.


C. Persons Exempted from Corporation Tax

The following persons are exempt from corporation tax:

1. The UAE Federal and Emirate Governments and their departments, authorities and other public institutions;

2. Wholly Government-owned companies that carry out a mandated activity, and that are listed in a Cabinet Decision;

3. Businesses engaged in the extraction of UAE natural resources and related non-extractive activities that are subject to Emirate-level taxation after meeting certain conditions;

4. Public Benefit Entities that are listed in a Cabinet Decision;

5. Investment Funds that meet the prescribed conditions;

6. Public or private pension or social security funds that meet certain conditions; and

7. UAE juridical persons that are wholly-owned and controlled by certain exempted entities after meeting certain conditions.


How are the above exempted:

Automatically or by way of application.

 

D. Sources of Tax Free Income

• Charities and other public benefit organisations will be exempt from UAE CT, subject to meeting certain conditions and being listed in a Cabinet Decision.
• Dividends and capital gains earned from domestic and foreign shareholdings would generally be exempt from CT, subject to certain conditions.
• Capital gains on the sale of shares may be exempt from corporate income tax, subject to meeting certain conditions.
• Income earned by an individual from the investment in UAE property in their personal capacity will generally not be subject to UAE CT.
• Profits below the AED 375,000 per annum
• Small businesses with revenue below a certain threshold can claim ‘small business relief’ and be treated as having no taxable income during the relevant Tax Period and may be subject to simplified compliance obligations. To claim small business relief, an election must be made to the FTA.
• Any UAE resident juridical person or individual with revenues below the threshold defined by the Minister and that meets any other conditions that may be set, can claim small business relief.

Other Tax-Free Income Streams

The following income is exempt from UAE CT:

1. Dividends and other profit distributions received from UAE incorporated or resident legal persons;

2. Dividends and other profit distributions received from a Participating Interest in a foreign juridical person (see further information below);

3. Certain other income (e.g., capital gains, foreign exchange gains / losses and impairment gains or losses) from a Participating Interest (see further information below);

4. Income from a foreign branch or permanent establishment where an election is made to claim the “Foreign Permanent Establishment” exemption; and

5. Income earned by non-residents from the operation or leasing of aircrafts or ships in international transportation where certain conditions are met (see further information below).

Being a qualifying free zone person -0% Free Zone CT once declared in the tax return.

Exempted persons - usually governmental organisations and extracting companies.

At Berkley Limited, we go beyond traditional compliance services, positioning ourselves as strategic partners who empower your business to thrive. Over the years we have helped many of our clients set up local foundations for asset protection / inheritance purposes. Licensed by the ADGM (License No. 17269), our seasoned in-house team works seamlessly to provide a complete solution to our clients, from licensing and relocation to continuous support with compliance matters such as accounting, audit and tax. We tailor our approach to meet each client’s unique needs, allowing them to stay compliant while focusing on their core business objectives.

Our vision is simple yet profound: to add meaningful value to every task we undertake and to serve not just as a service provider, but as a trusted ally for businesses navigating the complexities of today’s global environment. Rooted in the principles of value, integrity, and trust, Berkley delivers not only compliance, but genuine confidence. Experience the difference of a firm dedicated to your success.

📩 Get in Touch 📍 Berkley Limited – Abu Dhabi Global Market (ADGM), License No. 17269

🌐 www.berkley.ae ✉️ k.tramountantellis@berkley.ae

📞 +971 58 802 1757 📞+357 99 428 543

Risk & Disclaimer Section 

Important Notice & Disclaimer

This document is provided for general informational purposes only and does not constitute legal, tax, investment, or other professional advice. The information contained herein is based on legislation, regulations, and practices in force at the time of writing and may be subject to change.

UAE foundations are complex structures involving multiple legal and tax jurisdictions. The tax treatment of any foundation, founder, or beneficiary depends on individual circumstances, including residency status, asset location, governance arrangements, and applicable foreign laws. No reliance should be placed on this document as a substitute for obtaining specific professional advice.

CYAUSE Audit Services Ltd does not accept any liability for actions taken or not taken based on the contents of this publication. Readers are strongly advised to seek independent legal, tax, and regulatory advice before establishing or restructuring any foundation or related entity.

Nothing in this document is intended to create, nor shall it be construed as creating, an auditor-client, advisor-client, or fiduciary relationship.