Innovation is widely regarded as one of the key mechanisms for companies to sustain and drive business growth. Taxes are considered a financial burden for companies, but in the law of direct taxes, incentives and exemptions are always considered for the performance of companies. The purpose of this research is to explain the relationship between tax exemptions and company innovation. This research is applied in terms of purpose and correlational in terms of nature and causal method. The statistical population of the research was all the companies admitted to the stock exchange in 1400, and a total of 450 companies were studied through systematic elimination sampling. A questionnaire was used to measure the company's innovation, and 450 questionnaires were sent to the senior managers of the company, and finally 396 questionnaires were received and analyzed. The dependent variable of company innovation research includes product innovation and process innovation, and its independent variable is tax exemptions. A generalized regression model was used to test the research hypotheses. The research findings showed that there is no significant relationship between tax exemptions and product innovation, but there is a positive and significant relationship between tax exemptions and processing innovation. Therefore, increasing tax exemptions will create new ideas and processes for product production.