The UAE has announced a change to tax laws exempting certain companies from paying a mandatory Corporate Tax fee.
The Ministry of Finance unveiled a new decision by the UAE Cabinet new relating to Qualifying Public Benefit Entities.
It is designed to ensure that companies and organisations operating for the wider public benefit don’t have to pay the tax.
UAE tax law change
Qualifying public benefit entities are established for the welfare of the public and society, focusing on activities which contribute to the fabric of the UAE.
Typically, this focus is on public welfare, promoting philanthropy, community services or corporate and social responsibility.
This implementing decision is designed to reflect these entities’ important role in the UAE, which often includes organisations with a focus on
- Religion
- Charitable
- Science
- Education
- Culture
To be eligible for UAE Corporate Tax exemption, these entities must meet the conditions under Article (9) of the Corporate Tax Law and they must continue to comply with all relevant federal and local laws and notify the Ministry of Finance of any changes occurring to these entities that impact their status as a Qualifying Public Benefit Entity.
The Qualifying Public Benefit Entities should also register in the Federal Tax Authority and obtain a Tax registration number for Corporate Tax purposes.
The Cabinet may amend the schedule of Qualifying Public Benefit Entities at the suggestion of the Minister by modifying, adding, or removing entities.
An entity that is listed in the schedule annexed to the decision must make a notification of any change occurring to the entity that impact the entity’s continuity in meeting the conditions set out in this Decision and the Corporate Tax Law.
Various reporting obligations apply to Qualifying Public Benefit Entities, principally to check that they continue to meet the criteria for approval
The Cabinet’s decision provides further certainty and transparency for taxpayers in relation to their deductible expenditure under Article 33 of the Corporate Tax Law, as donations and gifts will be allowed as deductible expenditure for Corporate Tax purposes if they are made to a Qualifying Public Benefit Entity listed in the Cabinet Decision.
UAE Corporate tax rates
- Zero percent on the portion of the Taxable Income below AED375,000.
- Nine percent on Taxable Income that exceeds AED375,000.
UAE Corporate Tax exemptions
- Government entities.
- Government controlled entities.
- Person engaged in an extractive business.
- Person engaged in a non-extractive natural resource business.
- Qualifying public benefit entity.
- Qualifying investment fund.
- Public pension or social security fund that is subject to regulatory oversight of the competent state authority.
- Private pension or social security fund that is subject to regulatory oversight of the competent state authority.
- A juridical person incorporated in the State that is wholly owned and controlled by
- an Exempt Person that conducts any of the following:
- Undertakes part or whole of the activity of the Exempt Person.
- Is engaged exclusively in holding assets or investing funds for the benefit of
- the Exempt Person.
- Only carries out activities that are ancillary to those carried out by the Exempt Person.
- Any other Person as may be determined in a decision issued by the Cabinet at the suggestion of the Minister.
• Cabinet Decision No. (37) of 2023 Regarding the Qualifying Public Benefit Entities for the Purposes of Federal Decree-Law No. 47 of 2022 on the Taxation of Corporations and Businesses.
• Entities which contribute to the welfare of the public and society in the UAE can qualify for Corporate Tax exemption if they meet certain criteria.
This Cabinet Decision also provides further certainty and transparency for taxpayers in relation to their deductible expenditure under Article 33 of the Corporate Tax Law, as donations and gifts will be allowed as deductible expenditure for Corporate Tax purposes if they are made to a Qualifying Public Benefit Entity listed in the Cabinet Decision.
For more information relating to Corporate Tax, please refer to the Ministry of Finance’s website: www.mof.gov.ae.
