The UAE Ministry of Finance has recently announced major tax updates that enhance the country’s appeal as a global economic hub. With the introduction of Cabinet Decision No. 55 of 2025, the scope of corporate tax exemptions has been expanded to include certain foreign entities wholly owned by exempt persons, such as:
- Government entities
- Government-controlled entities
- Qualifying investment funds
- Public pension or social security funds
This marks a significant expansion from the previous framework, where the exemption was strictly limited to entities incorporated within the UAE. Now, foreign companies that meet the required conditions may also qualify for the exemption, provided their activities comply with specific criteria.
The primary objective is to ensure fair tax treatment between local and foreign entities connected to exempt persons. This reinforces the UAE’s position as a competitive jurisdiction for holding structures, while promoting a tax system aligned with international standards.
Exemption from Penalties for Late Tax Registration
In parallel, the Federal Tax Authority (FTA) has launched an initiative to support businesses in adapting to the new tax regulations. An administrative penalty waiver has been approved for entities that file late corporate tax registration applications, as long as they meet a revised deadline.
Who is eligible for the exemption?
The exemption applies to taxable persons or exempt persons required to register, if they:
- File their first corporate tax return (or annual return) within seven months after the end of their first tax period (instead of the previous nine-month window);
- Have received a penalty but not yet paid it;
- Have already paid the penalty — in this case, the amount will be credited back to their FTA account.
This initiative applies only to the first tax period, regardless of when the filing deadline falls.
Promoting Tax ComplianceKhalid Ali Al Bustani, Director General of the FTA, encouraged all unregistered businesses to complete the registration process via EmaraTax without delay, emphasizing the UAE’s commitment to building an efficient and transparent tax environment.
“Widespread tax compliance is a key driver of economic growth,” Al Bustani stated, noting that over 543,000 corporate tax registrations were recorded in the first quarter of 2025 — a clear sign of rising awareness among businesses about their tax obligations.
Final Remarks
The UAE’s latest measures highlight the country’s dedication to maintaining a dynamic, inclusive, and investor-friendly regulatory environment. The extension of corporate tax exemptions to foreign entities and the relaxation of administrative penalties provide new opportunities for institutional investors and international companies eyeing the UAE market.
For more information on how these tax changes may impact your business, the Kelmer Group team is available to offer strategic and operational support.
Sources:
https://www.arabianbusiness.com/industries/banking-finance/uae-announces-tax-exemption?utm_medium=email&utm_medium=email&utm_campaign=UAE%20tax%20exemption%20Dubai%20visa%20centre%20opened%20Air%20taxi%20trials%20this%20year%20043008%20AM&utm_content=UAE%20tax%20exemption%20Dubai%20visa%20centre%20opened%20Air%20taxi%20trials%20this%20year%20043008%20AM+CID_04d2ef6e098a4b52cbd6be9949b1e319&utm_source=Newsletters&utm_term=UAE%20announces%20tax%20exemption
https://www.arabianbusiness.com/industries/banking-finance/uae-tax-fine-waiver
https://tax.gov.ae/en/default.aspx