UAE exempts firms focusing on welfare activities from corporate tax
In a major change to the Corporate Tax Law, the UAE has announced that entities contributing to the welfare of the public and society will be exempted from paying the mandatory tax that comes into effect later this year.
To be eligible for the exemption, the Ministry of Finance said in a new directive that these entities must meet the conditions under Article 9 of the Corporate Tax Law and continue to comply with all relevant federal and local laws.
“This implementing decision is designed to reflect these entities’ important role in the UAE, which often includes religious, charitable, scientific, educational or cultural value, among others,” it said in a statement.
Last year, the government passed a federal decree on corporate tax, mandating firms to pay 9 percent for taxable business profits exceeding 375,000 UAE dirhams ($102,118). The law is set to come into effect for financial years starting June 1, 2023.
The qualifying entities looking to get the exemption should register with the Federal Tax Authority and obtain a tax registration number for corporate tax purposes, the new directive said.
The ministry said the cabinet decision also provides further certainty and transparency for taxpayers. Additionally, the firms making donations and gifts to a qualifying public benefit entity can claim the same as deductible expenditure for corporate tax purposes.
The statement clarified that 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 impacts the entity’s continuity in meeting the conditions set out in this decision and the Corporate Tax Law,” it added.
The new decision comes after the ministry announced earlier that it would exempt non-resident persons, government entities, government-controlled entities, extractive businesses and non-extractive natural resource businesses from paying corporate tax.
“This implementing decision is designed to reflect these entities’ important role in the UAE, which often includes religious, charitable, scientific, educational or cultural value, among others,” it said in a statement.
Last year, the government passed a federal decree on corporate tax, mandating firms to pay 9 percent for taxable business profits exceeding 375,000 UAE dirhams ($102,118). The law is set to come into effect for financial years starting June 1, 2023.
The qualifying entities looking to get the exemption should register with the Federal Tax Authority and obtain a tax registration number for corporate tax purposes, the new directive said.
The ministry said the cabinet decision also provides further certainty and transparency for taxpayers. Additionally, the firms making donations and gifts to a qualifying public benefit entity can claim the same as deductible expenditure for corporate tax purposes.
The statement clarified that 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 impacts the entity’s continuity in meeting the conditions set out in this decision and the Corporate Tax Law,” it added.
The new decision comes after the ministry announced earlier that it would exempt non-resident persons, government entities, government-controlled entities, extractive businesses and non-extractive natural resource businesses from paying corporate tax.
