UAE resident juridical persons will be subject to UAE CT on their income source from both the UAE and from abroad, although certain income earned through foreign subsidiaries and income of foreign branches that is subject to tax in another jurisdiction will generally be exempt from UAE CT. Further details of these exemptions are set out under question ‘Will the income of foreign branches of a UAE business be subject to UAE CT?’ under section Branches and question ‘What is the participation exemption regime?’ under section Income exempt from CT.
Where income earned from abroad is not exempt, relief for income taxes paid in the foreign jurisdiction can be taken as a credit against the CT payable in the UAE on the relevant income to prevent double taxation (see section ‘Tax Credits’).

The background to the participation exemption regime is to prevent double taxation within a group where an underlying group company (that pays the dividend or whose shares are being sold) has already been taxed on its profits. 

The Corporate Tax Law fully exempts dividends derived from UAE entities, as well as dividends from foreign subsidiaries that qualify as a “Participation”. A Participation is a juridical person in which the UAE shareholder company owns a 5% or greater ownership interest (a “Participating Interest”) for at least 12 months, and that meets the conditions of the participation exemption regime. 

Similarly, capital gains on the sale of shares in domestic and foreign entities would also be exempt from CT. This exemption is subject to the same minimum ownership threshold, duration and other conditions mentioned above.