Answer:
Yes, dividends and capital gains can be exempt under the participation exemption regime designed to prevent double taxation and promote genuine investment activity (Article 22, Article 23 of Federal Decree-Law No. 47 of 2022 and Ministerial Decision No. 302 of 2024).
Dividends:
• From UAE entities: Always exempt, regardless of ownership percentage or the Corporate Tax status of the payer.
• From foreign entities: Exempt if received from a Participating Interest, which means:
- 5% or greater ownership (or AED 4 million acquisition cost),
- held for at least 12 months,
- the foreign entity is subject to corporate (or similar) tax at a rate of at least 9%,
- and other technical conditions are met.
- Otherwise, dividends are taxable at 9%.
Capital gains:
• Exempt if derived from the sale of a Participating Interest (same conditions as above).
• May also be exempt in qualifying intra-group restructurings or reorganisations.
• Other capital gains are taxable.
Example:
Company A owns 10% in a foreign company (Company B), acquired for AED 5 million, held for over 12 months. Company B is subject to 10% fore...