Dividends from a subsidiary — exempt from Corporate Tax?

The participation exemption under Law 47 exempts dividends and capital gains from selling a qualifying shareholding in a subsidiary from Corporate Tax — the logic being the subsidiary already paid its own tax, so there's no need to tax it again on distribution to a parent in the same jurisdiction.

The core condition is a minimum 5% ownership stake — but there's an alternative: if the acquisition cost of the interest (not its percentage) is at least AED 4 million, this condition is treated as met even below 5%. On top of that: a 12-month holding period (or genuine intent to hold that long), and the subsidiary must be subject to tax at a rate of 9% or more where it's based (the "sufficient subject-to-tax" test). If any condition is missing, the exemption doesn't apply and the income falls into the ordinary tax base. RASEEKH reviews the investment structure before dividends are distributed, not after a client is surprised by tax they didn't expect.