UAE Firms Focusing On Welfare Now Exempted From Corporate Tax

KEY POINTS

The change in the Corporate Tax Law reflects the importance of welfare entities in the UAE
Entities looking to qualify for the exemption should continue to comply with local and federal laws
They should also register with the Federal Tax Authority and get a tax registration number

The UAE has modified its Corporate Tax Law to exempt firms focusing on welfare activities, the Ministry of Finance announced on Sunday.

The tax exemption will reportedly apply to firms established "for the welfare of the public and society, focusing on activities which contribute to the fabric of the UAE," provided they meet the conditions under Article 9 of the Corporate Tax Law, the ministry said in a press release.

The entities should also continue to comply with all relevant federal and local laws, and inform the ministry should there be any changes that may impact their status as a Qualifying Public Benefit Entity, Al Arabiya reported.

The MoF unveiled a UAE Cabinet new implementing decision relating to Qualifying Public Benefit Entities for the purposes of the Corporate Tax Law, which is designed to ensure that entities existing and operating for the wider public benefit are eligible for tax exemption.#UAECT pic.twitter.com/e0fYR1LbOt
— وزارة المالية | الإمارات (@MOFUAE) April 23, 2023

"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," the ministry said in the release.

The ministry added entities qualified for the exemption should register with the Federal Tax Authority and get a tax registration number for corporate tax purposes.

As for the schedule of the qualifying entities, the ministry said, "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."

Complying with the UAE's Corporate Tax Law is based on a self-assessment principle, which means entities should ensure the documents submitted to the Federal Tax Authority are legal and truthful, according to The National.

Donations to Qualifying Public Benefit Entities will also become a deductible expenditure under Article 33 of the Corporate Tax Law.

The change comes less than a year after the UAE government passed a federal decree on corporate tax, obliging entities to pay 9% for their taxable business profits beyond 375,000 UAE dirhams. It will come into effect starting June 1.

The decision also comes after the ministry issued a list of entities exempted from corporate tax, including non-resident persons, government and government-controlled entities, extractive businesses, and non-extractive natural resource businesses, earlier this month.