MoF Announces Exemption From Corporate Tax For Public Benefit Entities Under Specific Criteria

The Ministry of Finance of the United Arab Emirates declared that the public benefit entities that contribute towards the well-being of society and the public would be eligible for an exception under the Corporate Tax Law of the UAE. The decision regarding the exemption of Corporate Tax was taken in a meeting of the UAE Cabinet.

The decision comes under Cabinet decision No. 37 of 2023, about the Qualifying Public Benefit Entities

The Ministry of Finance said that this Cabinet decision was issued in connection with the Federal Decree-Law No. (47) of 2022, which deals with the Taxation of Corporations and Businesses.

Under this decision, the organizations that contribute towards the welfare of the public and society will get qualified for an exemption from the Corporate Tax based on certain criteria.

This Corporate Tax Law which will come into effect from June 1^st, 2023, or after that will serve as a legal foundation for the introduction and execution of a Federal Corporate Tax in the United Arab Emirates.

UAE declares the Federal Decree Law No. (47) of 2022 which deals with the Taxation of Corporations and Businesses on December 9^th of 2022. 

This new exemption was framed with the aim of acknowledging the substantial role played by the public benefit entities. This includes businesses that led concentration on specific topics like charity, religion, education, culture, and science. 

To become eligible for the United Arab Emirates Corporate Tax exemption, these public benefit entities should strictly adhere to all the appropriate state, local and federal laws.

Moreover, they are advised to inform the Ministry of Finance of any changes that may create an impact on their position as a Qualifying Public Benefit Entity. 

It is required that the public benefit entities should register their name in the Federal Tax Authority and acquire a Tax registration number for Corporate Tax purposes.

The non-resident businesses that earn profit from the United Arab Emirates are not required to register for the exemption if they do not have a permanent establishment there.  

The public benefit entities are also required to meet the necessities of Article (9) of Corporate Tax Law. The Cabinet has the right to modify, add or remove the name of the organizations from the list of Qualifying Public Benefit Entities on the recommendation of the Finance Minister. 

According to the decision, if there happens any change which may affect the ability of the entity to meet the requirements detailed in the decision and that of the Corporate Tax Law.

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Such changes must be reported by the entity listed in the schedule which is enclosed with the decision. 

The decision also imposes certain requirements on the pubic benefit entities to be eligible for the exemption. These reporting requirements are imposed to make sure that the entities continue to satisfy the conditions required for the approval.

This new decision taken by the Cabinet is helpful for the taxpayers as it provides more transparency and clarity to them regarding their deductible expenses that come under Article 33 of Corporate Tax Law.

According to the decision, gifts, and donations will be considered deductible expenses for the corporate tax, if they are handed over to any one of the public benefit entities listed in the Cabinet Decision.