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UAE reveals changes to tax laws

The UAE Ministry of Finance has announced that certain organisations and companies will be exempt from mandatory tax payments

By Staff writer  
By Staff writer  

The UAE has introduced a modification in tax regulations that exempts specific companies from the compulsory Corporate Tax levy.

The Ministry of Finance made the announcement following the UAE Cabinet’s new directive pertaining to Qualifying Public Benefit Entities with the aim of ensuring that corporations and establishments serving the greater public good are exempt to pay the tax.

Qualifying public benefit entities have a primary objective to enhance the wellbeing of the society and the public, by engaging in activities that contribute towards the development of the UAE’s social framework.

Such entities are typically associated with initiatives that promote public welfare, encourage philanthropic efforts, offer community services or demonstrate corporate and social responsibility. These include organisations that focus on

  • Religion
  • Charitable
  • Science
  • Education
  • Culture

The recent implementing decision aims to acknowledge the crucial role played by these entities in the UAE, particularly those that prioritise the aforementioned objectives.

In order to qualify for exemption from Corporate Tax in the UAE, certain entities must adhere to the conditions outlined in Article 9 of the Corporate Tax Law and remain in compliance with all relevant federal and local regulations. Additionally, any changes that may affect the status of these entities as Qualifying Public Benefit Entities must be promptly reported to the Ministry of Finance.

It is also necessary for these entities to register with the Federal Tax Authority and obtain a Tax registration number for Corporate Tax purposes. The Cabinet has the power to modify the list of Qualifying Public Benefit Entities by adding or removing entities based on the recommendation of the Minister.

Entities that are included in the list provided in the decision must report any changes that may impact their ability to meet the conditions specified in the Decision and the Corporate Tax Law. These entities are also subject to various reporting requirements to ensure that they continue to meet the criteria for approval.

The Cabinet’s decision provides greater certainty and transparency for taxpayers regarding the deductibility of donations and gifts under Article 33 of the Corporate Tax Law. If these donations and gifts are made to a Qualifying Public Benefit Entity listed in the Cabinet Decision, they will be allowed as deductible expenditure for Corporate Tax purposes.

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.