UAE allows corporate tax exemptions for companies serving the community

Abu Dhabi: The UAE Ministry of Finance, on Sunday, unveiled a Cabinet decision that exempts 'Public Benefit Entities' from the Corporate Tax Law. The exemption ensures that entities operating for the wider public benefit are eligible for tax exemption.

According to the Ministry, 'public benefit entities' are established for the public's and society's welfare and are focused on activities contributing to the fabric of the UAE. Typically, these entities focus on public interest, promoting philanthropy, community services or corporate and social responsibility. The Cabinet's decision is designed to reflect the critical role these organisations play in the UAE, which often includes religious, charitable, scientific, educational, or promoting cultural values, among others.

The Ministry said Cabinet Decision No. (37) of 2023 has been passed regarding the Qualifying Public Benefit Entities for Federal Decree-Law No. 47 of 2022 on the Taxation of Corporations and Businesses.

How to qualify for tax exemption?

For public benefit entities to quality for Corporate Tax exemption, they 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 with the Federal Tax Authority (FTA) 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 impacts 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.

Tax deductibles

This Cabinet Decision provides further transparency for taxpayers concerning their deductible expenditure under Article 33 of the Corporate Tax Law. Donations and gifts will be allowed as deductible expenditures for Corporate Tax purposes if made to a qualifying Public Benefit Entity listed in the Cabinet Decision.

Earlier this month, the UAE Ministry of Finance released details of public and private organisations exempted from tax registration for the new Corporate Tax Law, which comes into force in June this year.

Apart from Public Benefit Entities, a 'non-resident' company will not be required to register for Corporate Tax if it earns UAE-sourced income but has no permanent establishment in the country.

The Ministry said that government and government-controlled organisations, extractive businesses and non-extractive natural resource businesses that meet the set conditions are not required to register under the UAE Corporate Tax Law.