UAE allows corporate tax exemptions for public benefit entities

Organisations have to meet the conditions specified in Article 9 of the corporate tax law

The Dubai skyline. The UAE introduced federal corporate tax with a standard statutory rate of 9 per cent last year. AP
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Public benefit organisations that contribute to the welfare of society will be eligible for exemptions under the UAE's corporate tax law, the Ministry of Finance said on Sunday.

Organisations that qualify for the exemption, which was decided by the UAE Cabinet, will include entities that focus on activities such as philanthropy, community services and corporate social responsibility, the ministry said.

“This implementing decision is designed to reflect these entities' important role in the UAE, which often includes religious, charitable, scientific, educational, or cultural value”, the Ministry of Finance said.

To qualify for the exemption, entities must meet the conditions specified in Article 9 of the corporate tax law and must maintain compliance with all relevant federal and local laws, the ministry said.

They must also inform the ministry of any changes that may affect their status as a qualifying public benefit entity.

Last year, the UAE introduced the federal corporate tax with a standard statutory rate of 9 per cent, which will come into effect for businesses whose financial year starts on or after June 1 this year.

In December, the country issued the federal corporate tax law, bringing the income of companies exceeding Dh375,000 ($102,000) into the corporate tax bracket.

The UAE corporate tax law currently exempts certain entities, including those involved in natural resource extraction activities in the country. However, they are still subject to existing local emirate-level tax.

Other exemptions are available to organisations such as government entities and pension or investment funds.

Existing free-zone entities are also exempt from corporate tax because they are among the drivers of the UAE's economic growth, the ministry said in December.

Public benefit entities should register with the Federal Tax Authority (FTA) and obtain a registration number for corporate tax purposes, the Ministry of Finance said.

“The Cabinet may amend the schedule of qualifying public benefit entities at the suggestion of the minister by modifying, adding, or removing entities,” it said.

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Qualifying public benefit entities have reporting obligations to ensure they meet the approval criteria.

The Cabinet decision also allows donations to qualifying public benefit entities to be a deductible expenditure under Article 33 of the corporate tax law.

The UAE's corporate tax regime is based on a self-assessment principle, which means businesses are required to ensure that the documents submitted to the FTA are correct and comply with the law.

Updated: April 23, 2023, 2:02 PM