Dividends and Share Gains Under UAE Corporate Tax: How the Participation Exemption Works

Holding companies, family groups and investors in the UAE often ask the same question: is the income from my shareholdings taxed at 9%? In many cases the answer is no, thanks to two separate exemptions. But the conditions for foreign shareholdings need care.

Dividends from UAE companies

Dividends and other profit distributions received from a UAE resident company are exempt from Corporate Tax, with no minimum shareholding or holding period. This comes from Article 22 of the Corporate Tax Law.

The participation exemption

For other income from shareholdings, including dividends from foreign companies and gains on selling shares, the participation exemption in Article 23 can apply. The shareholding is called a Participating Interest if it meets these conditions:

1. Size. You hold at least 5% of the company, or your shareholding cost at least AED 4 million.
2. Holding period. You hold the shares, or intend to hold them, for an uninterrupted 12 months.
3. Subject to tax. The company is subject to Corporate Tax or a similar tax at a rate of at least 9% in its own country, with some exceptions.
4. Asset test. For related-party participations, no more than 50% of the company's assets consist of shareholdings that would not qualify themselves.

If the conditions are met, the following are exempt:

• Dividends and profit distributions from the Participating Interest
• Gains and losses on selling or transferring it, and on revaluing it
• Certain foreign exchange gains and losses and impairment related to it

What changed from 2025

Ministerial Decision No. 302 of 2024, which applies to tax periods starting on or after 1 January 2025, updated the rules:

• The AED 4 million cost alternative now applies consistently across all the ownership tests, not only share capital.
• The 50% asset test applies only where the participation is a related party.
• New rules cover share exchanges and limit the use of liquidation losses.

Common pitfalls

• Low-tax jurisdictions. A subsidiary in a country with no or very low corporate tax may fail the 9% test, so its dividends may be taxable.
• Selling early. If you sell within 12 months, the exemption depends on showing you intended to hold for 12 months, so keep evidence of that intention, such as board minutes and investment plans.
• Losses on shares. If gains would be exempt, losses on the same shares are generally not deductible either.
• Small stakes. A shareholding under 5% that cost less than AED 4 million does not qualify.

What to do now

1. List every shareholding with ownership percentage, cost and acquisition date.
2. Check the tax rate in each subsidiary's country.
3. Plan disposals around the 12-month holding period.
4. Keep evidence: share registers, purchase agreements and the subsidiary's tax position.

How Dreambooks helps

Dreambooks keeps an investment register with ownership, cost and acquisition dates for each shareholding, tags dividends and gains as exempt or taxable, and carries the adjustments into your Corporate Tax return.

Official sources

• WAM: Ministry of Finance announces amendments to ministerial decisions on tax groups and participation exemption
• FTA: Corporate Tax legislation

This article is general information as of July 2026, not tax advice. Check the Corporate Tax Law, Ministerial Decision No. 302 of 2024 and the latest FTA guidance, or speak to your tax adviser, before acting.