Key takeaways
- A UAE company that receives a dividend from another UAE resident company pays no corporate tax on it, with no minimum shareholding and no holding period, under Article 22(1) of Federal Decree-Law No. 47 of 2022.
- A UAE company that receives a dividend from a foreign company is exempt only if the participation exemption applies: a stake of 5% or more (or an acquisition cost of AED 4,000,000 or more), held for 12 months, in a company subject to tax of at least 9%.
- A UAE company that pays a dividend gets no corporate tax deduction for it, because Article 33 of Federal Decree-Law No. 47 of 2022 disallows distributions to owners.
- UAE withholding tax on payments to non-residents, dividends included, is set at 0% by Article 45 of the Law, as at 2 November 2026; the Cabinet can change the rate.
- A natural person who holds shares as a personal investment isn't subject to corporate tax on the dividends, according to the FTA's guide on natural persons.
Are dividends taxable under UAE corporate tax?
Dividends received from a UAE resident company are exempt income for the receiving company. Article 22(1) of Federal Decree-Law No. 47 of 2022 removes "dividends and other profit distributions received from a juridical person that is a Resident Person" from taxable income, and the FTA's dividends guide says such a dividend is "always" exempt.
That rule has no ownership floor. A company holding 1% of a UAE LLC receives its dividend tax-free in the same way as a company holding 100%. The tests below only matter when the payer is outside the UAE.
The table shows how the main recipients are treated, as at 2 November 2026.
| Who receives the dividend | Who pays it | Corporate tax treatment | Source |
|---|---|---|---|
| UAE company | UAE resident company | Exempt, no conditions | Article 22(1) |
| UAE company | Foreign company | Exempt only if participation exemption conditions are met; otherwise part of taxable income | Articles 22 and 23 |
| Qualifying Free Zone Person | UAE resident company | Exempt | FTA dividends guide |
| Natural person, personal investment | Any company | Not subject to corporate tax | FTA natural persons guide |
| Natural person, through a business | UAE resident company | Exempt under Article 22(1) | FTA dividends guide, Example 3 |
| Non-resident shareholder | UAE company | 0% withholding tax | Article 45 |
Taxable income itself is taxed at 0% up to AED 375,000 and 9% above it (Article 3 of the Law and Cabinet Decision No. 116 of 2022), so a dividend that falls outside the exemptions is taxed at those rates.
When is a dividend from a foreign company exempt?
A dividend from a foreign company is exempt if it comes from a Participating Interest that meets the conditions in Article 23 of Federal Decree-Law No. 47 of 2022 and Ministerial Decision No. 302 of 2024. If any condition fails, the dividend is taxable income and is taxed at 9% above AED 375,000.
| Condition | What the rule says | Source |
|---|---|---|
| Size of stake | Ownership of 5% or more of the shares or capital | Article 23(2) |
| Alternative size test | Acquisition cost of AED 4,000,000 or more, where the stake is under 5% | Ministerial Decision No. 302 of 2024, Article 8(1) |
| Holding period | Held, or intended to be held, for an uninterrupted 12 months | Article 23(2)(a) |
| Subject to tax | The foreign company is subject to tax at a statutory rate of at least 9% (an effective rate of 9% also works) | Ministerial Decision No. 302 of 2024, Article 6 |
| Entitlement | Right to at least 5% of profits and of liquidation proceeds | Article 23(2)(c), as described in the FTA guide |
The participation exemption applies automatically: the FTA guide confirms there's no election and no application to file. Ministerial Decision No. 302 of 2024 applies to tax periods starting on or after 1 January 2025 and repeals Ministerial Decision No. 116 of 2023 for those periods; earlier periods stay under the old decision.
A Qualifying Free Zone Person or exempt person is treated as meeting the subject-to-tax condition, according to the FTA guide.
If you'd rather not track these dates by hand, the free UAE compliance calendar lists them for your company.
Can a company deduct the dividends it pays?
A company can't deduct dividends it pays. Article 33 of Federal Decree-Law No. 47 of 2022 disallows "dividends, profit distributions or benefits of a similar nature paid to an owner of the Taxable Person", so the profit is taxed first and distributed afterwards.
Say a company has taxable income of AED 1,375,000 and isn't a Qualifying Free Zone Person. Its corporate tax is 9% of the AED 1,000,000 above the AED 375,000 threshold, which is AED 90,000. Paying a AED 500,000 dividend to its owners leaves that figure unchanged. (This is a hypothetical example, not a client case.)
Withholding is a separate question. Article 45 sets tax on the State Sourced Income of non-residents at 0% in the form of withholding tax, with exceptions for income attributable to a permanent establishment. A UAE company paying a dividend to a foreign shareholder therefore deducts nothing today, but the Cabinet may set different rates.
Do individuals and free zone companies pay tax on dividends?
A natural person doesn't pay corporate tax on dividends earned as a personal investment, and a free zone company doesn't pay it on dividends from a UAE resident company. The treatment changes only where the shares sit inside a licensed business.
For individuals, the FTA's guide on natural persons says personal investment income isn't subject to corporate tax when a natural person earns it in a personal capacity. Business income is different: a natural person's business or business activity falls under corporate tax once turnover passes AED 1,000,000 in a calendar year (Cabinet Decision No. 49 of 2023). Dividends from a UAE resident company are still exempt under Article 22(1) even then.
For free zone companies, dividends from a UAE resident company are exempt automatically. Free zone status doesn't create a separate dividend rule, but it matters for whether the company is a Qualifying Free Zone Person, which is a question for its own advisers.
How do you check whether a dividend is exempt?
Check the payer's residence first, then the stake, then the holding period. Work through the steps in this order:
- Confirm whether the payer is a UAE resident juridical person. If it is, the dividend is exempt under Article 22(1) and you can stop.
- If the payer is foreign, measure your stake against the 5% test (on paid-up capital) or the AED 4,000,000 acquisition cost test.
- Confirm the 12-month holding period has been met, or that you intend to hold for 12 months.
- Confirm that the payer's jurisdiction taxes its profits at a statutory rate of at least 9%, or that its effective rate is at least 9%, using Ministerial Decision No. 302 of 2024 for periods starting from 1 January 2025.
- Keep the share register, acquisition evidence and the payer's tax position on file, so the exemption is supported if the FTA asks on EmaraTax.
AED 4,000,000: acquisition cost that can qualify a stake below 5% for the participation exemption. Source: Ministerial Decision No. 302 of 2024, Article 8(1), checked 02 November 2026.
What most guides don't tell you
The 12-month rule can reverse an exemption you already took. The FTA guide's example shows a dividend taken as exempt in 2024 being added back to 2025 income after the shareholder sold part of the stake within 12 months. Selling early turns past dividends taxable, so check the timeline before any disposal.
Costs of earning exempt income are not deductible. Article 22 removes exempt income "and related expenditure" from taxable income, and the FTA guide treats interest expense separately under the interest limitation rules. A holding company can't assume its financing costs offset taxable profit elsewhere.
Two decisions can apply to one structure. Ministerial Decision No. 116 of 2023 still governs tax periods that began before 1 January 2025, while Ministerial Decision No. 302 of 2024 governs later ones. A company with a non-calendar financial year should confirm which decision its period falls under.
Which deadlines apply to your company?
Dividend decisions sit alongside filing and payment dates that depend on your financial year, licence and VAT status. The free UAE compliance calendar lists your company's UAE tax and compliance deadlines, personalised from a few questions, as a PDF and calendar file.
Frequently asked questions
How are capital gains from selling shares taxed for UAE companies?
A gain on selling shares can fall under the participation exemption, but only if the stake met the conditions and was actually held for 12 months (Article 23(5)(b) as described in the FTA guide). A gain that doesn't qualify is ordinary taxable income, taxed at 9% above AED 375,000.
What is the participation exemption?
It's the rule in Article 23 of Federal Decree-Law No. 47 of 2022 that exempts income from a Participating Interest, meaning a 5% or greater ownership interest, if the conditions are met. It applies automatically; the FTA guide says no election or application is needed.
Does the UAE have withholding tax on dividends paid abroad?
Article 45 of Federal Decree-Law No. 47 of 2022 sets withholding tax on the State Sourced Income of non-residents at 0%. The Cabinet can set different rates, so check the current position before paying a foreign shareholder.
Do individuals pay corporate tax on personal investment dividends?
No. The FTA guide on natural persons says personal investment income isn't subject to corporate tax when a natural person earns it in a personal capacity. The position changes if the shareholding is part of a licensed business activity.
Does a foreign company's UAE branch pay corporate tax on dividends?
A non-resident's foreign dividends are taxable only if attributable to a UAE permanent establishment, and they're exempt if the participation exemption conditions are met. Dividends from a UAE resident company are exempt under Article 22(1).
About Qawi · Qawi is a corporate services firm licensed in the Sharjah Media City (SHAMS) free zone, handling company formation, visas and PRO, bookkeeping, VAT and corporate tax for UAE businesses. Guides are researched from FTA, Ministry of Finance and free zone sources. Qawi on LinkedIn
Sources
- Federal Decree-Law No. 47 of 2022 and its amendments, Ministry of Finance (consolidated text, January 2026)
- Corporate Tax Guide: Exempt Income, Dividends and Participation Exemption, FTA (October 2023)
- Ministerial Decision No. 302 of 2024 on the Participation Exemption, Ministry of Finance
- Ministerial Decision No. 116 of 2023 on the Participation Exemption, Ministry of Finance
- Cabinet Decision No. 116 of 2022 on the Taxable Income threshold, Ministry of Finance
- Corporate Tax Guide: Taxation of Natural Persons, FTA (November 2023)
Last checked: 02 November 2026
This is general information, not tax or legal advice for your specific situation.