What is the Participation Exemption regime?
The purpose of the Participation Exemption regime is to avoid double taxation in a group where a subordinate group firm (which pays the dividend or whose shares are being sold) has already paid taxes on its income.
Dividends received from UAE entities as well as dividends from overseas subsidiaries that meet the criteria for “Participation” are completely free under the Corporate Tax Law. A Participation is a legal entity that satisfies the requirements of the Participation Exemption regime and in which the UAE shareholder firm has a 5% or more ownership stake or has an acquisition value of at least AED 4,000,000 for at least 12 months.
The sale of shares in local and international companies would result in capital gains that are similarly free from the Corporate Tax.
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