Extractive Business: UAE Corporate Tax Exemption Guide

Federal Decree-Law No. 47 of 2022 on the Taxation of Corporations and Businesses (i.e. UAE Corporate Tax Law) establishes federal corporate tax, which applies to Tax Periods on or after 1 June 2023.

This article helps business owners understand these types of businesses and the regulatory supervision required to ensure compliance.

What is the UAE extractive business exemption under Corporate Tax Law?

An extractive business refers to the exploration, production, removal, or extraction of natural resources. Usually, these activities happen under a concession, license, or agreement from the local government.

Certain non-extractive natural resource businesses refer to businesses operating on activities related to natural resources that are not directly engaged in extraction.

These include companies that separate, treat, refine, process, store, transport, market, or distribute natural resources. They also need a license or agreement from the local government.

For example, an oil extraction company with a qualifying government concession may be exempt from federal Corporate Tax on that qualifying Extractive Business, provided the Article 7 conditions are met.

But if the same company conducts business outside the scope of its qualifying natural-resource Business, that activity may be treated as a separate Business for Corporate Tax purpose.

Income from these extra activities could be taxed in the UAE, even if the main extractive business is still exempt. This distinction is important for owners pursuing business growth, as expanding into activities outside the licensed business can change the company’s overall tax position.

Business Activity and Exemption Criteria: Who actually qualifies?

Whether a business qualifies for the exemption depends primarily on its activities and its right to conduct those activities, rather than simply on its size, ownership or location.

To see if a business qualifies, you need to look at its license or concession, the type of natural-resource work it does, and if it meets the UAE Corporate Tax rules.

Government Entity and Natural Resource Extraction: What is considered an Extractive Business?

The FTA defines Natural Resources including water, oil, gas, coal, minerals, and other non-renewable, non-living resources that can be extracted from the UAE’s Territory, including its lands, territorial sea and airspace above it. Renewable resources like solar energy, wind, animals, and plants are not included.

These activities usually need a right, concession, or license from the local government. Extractive businesses can be privately owned, government-owned, or set up as joint ventures with the local government.

Important distinction: Government Entity, Government Controlled Entity and Extractive Business

Certain government entities and government-controlled entities, including federal and local governments, ministries, and public institutions, are eligible for corporate tax exemption in the UAE.

Separately, an Extractive Business or Non-Extractive Natural Resource Business that qualifies as an Exempt Person under Article 7 or Article 8 generally does not need to register for Corporate Tax with the FTA, unless it conducts another Business that is subject to Corporate Tax.

Other Corporate Tax Exemptions: Qualifying Investment Funds and Related Services

Qualifying public benefit entities, such as charities and academic institutions, can enjoy corporate tax exemptions in the UAE if they meet specific conditions outlined in the Corporate Tax Law.

Qualifying Investment Funds may qualify for Corporate Tax exemption if they meet the prescribed conditions. Public and private pension or social security funds are a separate category of Exempt Person and must meet their own applicable conditions.

For example, interests in the fund may need to be traded on a Recognised Stock Exchange or made available to investors. A qualifying fund therefore needs to assess its regulatory status, investor base and structure before relying on the exemption.

The exemption for a Qualifying Investment Fund should not be confused with the tax treatment of the investment management services provided to that fund.

The fund and its manager are separate considerations for Corporate Tax purposes. A fund manager should therefore assess its own taxable business activities and income rather than assuming that the fund’s exempt status extends automatically to management fees or other services it provides.

Other Corporate Tax rules can also affect businesses involved in investment and financing activities. Participation Exemption can apply to certain dividends, capital gains and other income arising from a qualifying Participating Interest.

The FTA guidance confirms that units or interests in certain investment funds can constitute an ownership interest for the Participation Exemption where the relevant conditions are satisfied.

Corporate Tax Rate and UAE Free Zones: Is an extractive company automatically a QFZP?

A Qualifying Free Zone Person may benefit from a 0% Corporate Tax rate on Qualifying Income if it meets all applicable QFZP conditions, including the requirements relating to adequate substance, qualifying income, the de minimis threshold, transfer pricing and financial statements.

A Free Zone Person whose activities consist solely of qualifying exempt Extractive/Non-Extractive Natural Resource Business is not treated as a QFZP, because the Corporate Tax Law does not apply to that person in respect of those exempt activities.

If a Free Zone Person also conducts taxable other business, that other business can potentially fall within the QFZP regime if the relevant QFZP conditions are satisfied. This income is also assessed for qualifying and non-qualifying income under the de minimis rule.

Do adequate substance requirements apply?

Adequate substance is a QFZP condition. If a Free Zone company conducts only an exempt Extractive or Non-Extractive Natural Resource Business, it does not need to satisfy the QFZP substance requirements simply to obtain the Article 7/8 exemption.

How do you apply for exemption under the UAE Corporate Tax Regime?

Businesses should first confirm that they meet the exemption conditions under Articles 7 or 8 of the Corporate Tax Law. A qualifying Extractive Business or Non-Extractive Natural Resource Business must notify the Ministry of Finance in the form and manner agreed with the relevant Local Government. FTA Corporate Tax registration is generally not required unless the business also conducts other Business that is subject to Corporate Tax

Emirate-Level Tax: What does “effectively subject to tax” mean?

Both an extractive business and non-extractive natural resource business are effectively subject to tax under the applicable legislation of the relevant Emirate. This does not necessarily mean a conventional income tax.

The business can be taxed using:

• tax on income or profits as dictated by the Emirate;
• royalties on production or sales;
• another tax, charge, duty or direct tax levied by the Local Government.

For example, the Sharjah Law No. 3 of 2025 introduced a 20% tax on the relevant tax base for extractive and non-extractive businesses licensed in Sharjah, which took effect on 13 February 2025.

For extractive companies, the tax base is their share of the value of oil and gas produced, which includes royalties and any other agreed shares. For non-extractive companies, the tax base is their net adjusted taxable profits.

Ministry Notification + Federal Tax Authority: What compliance still applies?

A qualifying business must notify the Ministry of Finance in the form and manner agreed with the relevant Local Government. This notification is one of the express conditions for exemption.

Even where no federal Corporate Tax registration is required, the business must retain records and documents sufficient for the FTA to establish its exempt status for seven years after the end of the relevant Tax Period.

Other Business: What happens if an extractive company also trades, invests or provides services?

If the Person conducts other Business that is subject to Corporate Tax, it must meet the applicable FTA registration and Tax Return requirements in respect of that taxable Business.

The federal exemption protects the qualifying natural-resource business; it does not automatically shelter unrelated commercial activities.

Examples of potentially separate other business:

• commercial trading;
• consulting;
• other services and activities outside the scope of the natural-resource license.

The business needs to generate proper financial records and separate financial statements, with its Taxable Income calculated independently.

Transactions between the exempt natural-resource business and taxable other business are generally Related Party transactions and must follow the arm’s-length principle and applicable transfer pricing rules.

Business Friendly Policies for treating Business Expenses

Direct expenses should generally be attributed to the business they relate to and separated into their own accounts (i.e., break down your Chart of Accounts in this guide for accountants).

Common expenses need to be appropriately apportioned. The FTA guide provides a revenue-based approach, subject to specific Emirate-level rules where applicable.

The 5% Rule: When can ancillary or incidental income remain outside Corporate Tax?

If the other business is truly ancillary or incidental to the main extractive or natural-resource business, and its revenue is no more than 5% of the total revenue for the financial year, it does not count for federal Corporate Tax purposes.

“Ancillary” means something needed for or closely linked to the main activity. “Incidental” refers to rare or secondary activities. To decide, you look at things like size, value, duration, and how often they happen.

The 5% limit applies to the total income from all other businesses combined, not to each income stream on its own. For example, if the aggregate Revenue from the other Business reaches 5.5% of total Revenue, the 5% condition is not met even if each individual income stream is below 5%