Automatically Exempt Entities:

• Government Entities: All entities fully owned and operated by the UAE government are automatically exempt from corporate tax.
• Government-Controlled Entities: Entities specified in a cabinet decision and controlled by the government are also automatically exempt.

Exempt with Notification and Conditions:

• Extractive Industries: Businesses engaged in the extraction of natural resources are exempt, provided they notify the Ministry of Finance and meet specific conditions.
• Non-Extractive Natural Resource Businesses: Entities involved in natural resource activities other than extraction are eligible for exemption if they meet certain conditions and notify the Ministry of Finance.

Exempt with FTA Approval:

• Qualifying Public Benefit Entities: Entities providing public benefits and approved by the Federal Tax Authority (FTA) are exempt, subject to meeting certain conditions.
• Public and Private Pension and Social Security Funds: Pension and social security funds, both public and private, qualify for exemption if they meet the conditions set by the FTA.
• Qualifying Investment Funds: Investment funds that meet specific qualifying criteria and are approved by the FTA are exempt from corporate tax.
• Wholly Owned Subsidiaries: UAE subsidiaries wholly owned and controlled by a government entity, government-controlled entity, qualifying investment fund, or pension/social security fund are exempt from corporate tax.
• Dividends and Capital Gains: Corporate tax does not apply to dividends or capital gains received by a UAE business from qualifying shareholdings.
• Intra-Group Transactions and Reorganizations: Qualifying intra-group transactions and reorganizations are not subject to corporate tax, provided they meet necessary conditions.

Additional Exemptions:

• Individual Employment Income: Earnings from salaries and other employment-related income, whether from public or private sector employers, are not subject to corporate tax.
• Personal Bank Income: Interest and income from personal bank deposits or savings accounts are exempt from corporate tax.
• Foreign Investment Income: Income from dividends, capital gains, interest, royalties, and other investment returns earned by foreign investors is not subject to UAE corporate tax.
• Individual Real Estate Investments: Investments in real estate made by individuals in their personal capacity are not subject to corporate tax.
• Personal Investment Returns: Dividends, capital gains, and other returns from personal ownership of shares or securities are exempt from corporate tax.

What are the Conditions to be fulfilled to get exemption from corporate tax in a freezone area?- 2nd

Conditions for Corporate Tax Exemption in a Free Zone

1. Audited Financial Statements
   Businesses must maintain accurate financial records and have their accounts audited by a certified auditor to ensure transparency and compliance with reporting standards.
2. Income from Qualifying Activities
   To qualify for tax exemptions, businesses must generate income from activities that are officially recognized by the Free Zone’s regulations, such as trading, manufacturing, or services aligned with the Free Zone’s focus.
3. Substantial Presence
   Businesses must have a significant operational presence within the Free Zone, including a physical office, local staff, and substantial business activities, to prove genuine operations in the UAE.
4. Arm’s Length Principle and Transfer Pricing
   Transactions between related entities must follow the arm’s length principle, meaning they should be priced as if conducted between unrelated parties. Proper transfer pricing documentation must be maintained to demonstrate compliance with international standards.

Items Disallowed from Corporate Tax Deductions in the UAE

1. Personal Expenses:
2. Fines and Penalties:
3. Non-Commercial Gifts and Donations:
4. Excessive or Unreasonable Compensation:
5. Depreciation on Non-Eligible Assets:
6. Interest on Loans from Related Parties:
7. Expenses Related to Exempt Income:
8. Unsubstantiated Expenses:
9. Entertainment Expenses: