UAE Corporate Tax on Share Sale Gains: When It's 9% or Exempt

Key takeaways

• A UAE company's gain on selling shares is exempt from corporate tax only when the shares are a qualifying Participating Interest; otherwise the gain is taxable income taxed at 0% up to AED 375,000 and 9% above it (as of November 2026).
• A Participating Interest generally means holding at least 5% of the other company, or paying at least AED 4,000,000 for the stake, and holding it for a continuous period of at least 12 months.
• For gains, the FTA's guide says an intention to hold for 12 months is not enough; the 12 months must actually have passed before the sale.
• The company whose shares are sold must itself be subject to tax of at least 9%, or be a Qualifying Free Zone Person or an exempt person, for the exemption to apply.
• A stake that does not qualify gets no relief by election; its gain goes into taxable income, while a capital loss on a qualifying stake is not deductible.

Are capital gains on shares taxable for UAE companies?

Yes, by default. The UAE has no separate capital gains tax; a gain on selling shares is part of a company's taxable income and is taxed at 0% on income up to AED 375,000 and 9% above that, per the Ministry of Finance and u.ae (checked November 2026). The exception is the participation exemption in Article 23 of Federal Decree-Law No. 47 of 2022, which removes qualifying gains from taxable income.

The FTA's guide on dividends and the participation exemption confirms that gains or losses on transferring, selling or otherwise disposing of a Participating Interest are exempt income under Article 23(5)(b), when every condition is met.

What conditions must a share sale meet to be exempt?

A share sale is exempt when the stake is a Participating Interest at the time of sale: all five tests below must be satisfied, and the FTA says no election is required.

A UAE LLC that buys shares in another UAE company usually clears the subject to tax test, because the target pays UAE corporate tax. For a foreign target, the test depends on that country's statutory or effective rate, so check it before you rely on the exemption.

12 months: the continuous holding period a stake must have actually completed before a gain on its sale can be exempt. Source: Federal Decree-Law No. 47 of 2022, Article 23(2)(a) and 23(5)(b), as explained in the FTA guide on dividends and the participation exemption (CTGEXI1), checked 03 November 2026.

What happens if I sell before 12 months or hold under 5%?

If the stake fails any condition, the gain is not exempt and goes into taxable income for the period of sale. The FTA guide states that capital losses on a stake that does qualify are not deductible; how a loss on a non-qualifying stake is treated depends on the general deduction rules, so get advice before relying on it.

Here is a hypothetical: say a mainland LLC buys 10% of another UAE company for AED 1,500,000 in March 2025 and sells it in February 2026 for AED 2,400,000. The stake met the 5% test, but it was held for 11 months, so the AED 900,000 gain is not exempt. If the LLC had no other taxable income that year, the tax would be 9% of the amount above AED 375,000, which is AED 47,250. If it had waited one more month, the gain would have been exempt.

If you held the stake past 12 months and later something causes a condition to fail, the FTA guide says income previously treated as exempt is brought into taxable income in the period the condition is breached (Article 23(10)).

Which costs and losses follow the exemption?

When a share sale is exempt, the related costs follow it: acquisition and disposal expenses are not deductible and must be capitalised, per Ministerial Decision No. 302 of 2024 (Article 11). Foreign exchange and impairment gains and losses on the same stake are also covered by the exemption, so they are neither taxed nor deductible.

Liquidation losses have their own rule: a loss on a Participation that ceases to exist is measured against the fair value of proceeds and can be reduced by adjustments (Article 13). If you hold a stake that has lost value, speak to your adviser before liquidating it.

How do you check whether your share sale qualifies?

Work through the tests before the sale, because the 12 month period cannot be repaired afterwards.

1. Confirm the stake size: 5% of the target's paid up capital, or an acquisition cost of AED 4,000,000 or more.
2. Count the days from the date you acquired the shares to the completion date of the sale; you need at least 12 continuous months.
3. Confirm the target's tax status: UAE corporate tax, a Qualifying Free Zone Person or exempt person, or a foreign tax at 9% or more.
4. Check that the stake carries at least 5% of profits and liquidation proceeds.
5. If the target is a related party, test whether more than 50% of its direct and indirect assets are interests that would not qualify on their own.
6. Report the result in the corporate tax return on EmaraTax, and keep the evidence for the record keeping period.

If you'd rather not track these dates by hand, the free UAE compliance calendar lists your company's tax and compliance deadlines, personalised from a few questions, as a PDF and calendar file.

What most guides don't tell you

A signed sale agreement does not stop the clock. The 12 months have to be complete for a gain, and the FTA guide does not accept intention alone. Sellers who sign in month 11 and complete in month 13 should confirm which date their adviser treats as the disposal date; the guide's wording refers to the transfer, sale or other disposition.

The rules differ for a holding that qualifies on cost. A stake below 5% can still qualify through the AED 4,000,000 acquisition cost test, and Ministerial Decision No. 302 of 2024 sets out which costs count and reduces the cost proportionally on a partial sale. So selling half of a qualifying stake can drop the remainder below the cost threshold, and the decision says income previously excluded can come back into taxable income if the threshold is not met continuously for 12 months.

The 2025 change matters if your last review was older. Ministerial Decision No. 302 of 2024 repealed Ministerial Decision No. 116 of 2023 for tax periods starting on or after 1 January 2025, and the FTA guide cited here is dated October 2023. Where the guide and the newer decision differ, follow the decision.

Which deadlines apply to your company?

A share sale changes what you report in your corporate tax return, and the return has its own filing and payment deadline. The free UAE compliance calendar lists the dates that apply to your company, personalised from a few questions, as a PDF and calendar file.

Frequently asked questions

How do dividends get taxed under UAE corporate tax? Dividends received by a UAE company are exempt from corporate tax when they come from a qualifying Participating Interest, meaning the same 5% (or AED 4m cost), 12 month intent and subject to tax conditions are met. Dividends from holdings that fail those conditions are included in taxable income and taxed at 0% up to AED 375,000 and 9% above it.

What is the participation exemption? The participation exemption is the rule in Article 23 of Federal Decree-Law No. 47 of 2022 that exempts dividends and gains from a qualifying shareholding, and denies a deduction for related losses. It applies automatically when all its conditions are met; the FTA guide says no election or application is needed.

Does UAE corporate tax apply to foreign companies with a UAE branch? Yes: a foreign company is taxed on income attributable to its UAE permanent establishment, at the same 0% (first AED 375,000) and 9% rates as a UAE company, though a double tax agreement can change the outcome. Whether a particular branch is a permanent establishment depends on its facts, so confirm it before assuming either way.

What is a voluntary disclosure for corporate tax? A voluntary disclosure is the procedure a taxable person uses to correct an error in a filed corporate tax return, for example a share gain wrongly treated as exempt. Penalty treatment depends on the FTA's rules at the time, so check the current FTA guidance before filing.

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 on the Taxation of Corporations and Businesses, as described on u.ae
• FTA Corporate Tax Guide: Dividends and Participation Exemption (CTGEXI1, October 2023)
• FTA Corporate Tax Guide: Taxation of Foreign Source Income (November 2023)
• Ministry of Finance: Ministerial Decision No. 302 of 2024 on the Participation Exemption and Foreign Permanent Establishment Exemption
• Ministry of Finance: announcement of amendments to Ministerial Decisions on Tax Groups and the Participation Exemption, 23 December 2024
• FTA Corporate Tax Guide: Taxable Non-Resident Person (October 2023)
• Ministry of Finance: Cabinet Decision No. 116 of 2022 on the annual Taxable Income subject to Corporate Tax

Last checked: 03 November 2026

This is general information, not tax or legal advice for your specific situation.

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