Private Pension Funds and Private Social Security Funds

In a recent development, Ministerial Decision No. 115 of 2023 has introduced provisions for private pension funds and private social security funds, granting them exemptions from Corporate Tax as per Federal Decree-Law No. 47 of 2022. Let's delve into the key points of this decision:

Article (2): Private Pension Fund

Private pension funds can apply for exemption from Corporate Tax if the following conditions are met:

1. The fund's assets must be designated by law or contract as pension plan assets or financed through contributions for the sole purpose of financing pension plan benefits.
2. The fund must provide pension plan members or beneficiaries with rights, contractual claims, or entitlements against its assets or earnings.
3. The fund's income should exclusively consist of income specified in Article (4) of this decision.
4. The fund must have an auditor.

Article (3): Private Social Security Fund

Private social security funds are eligible for exemption from Corporate Tax if the following conditions are met:

1. The fund's assets must be assigned by law or contract to finance the end-of-service benefit.
2. The fund's income should solely comprise the income specified in Article (4) of this decision.
3. The fund must have an auditor.

Article (4): Income

For both private pension funds and private social security funds, income must be generated from the following sources:

1. Investments or deposits held to fulfill the fund's obligations, provided they do not constitute a business operated by the fund.
2. Underwriting commissions that are charged for the fund's purposes.
3. Rebates of charges paid by the fund to persons involved in managing its assets that are not considered compensation for services provided by the fund.
4. Any other income derived in accordance with an investment policy defined for the benefit of pension plan members or end-of-service beneficiaries.

Article (5): Contributions to a Private Pension Fund

As taxable persons, employers can deduct the total value of contributions made to a private pension fund for their pension plan members. The deductible value per pension plan member should not exceed 15% of their total deductible remuneration for corporate tax purposes in the relevant tax period.

Article (6): Administration

1. The auditor of a private pension fund or private social security fund must annually confirm the fund's compliance with the decision's provisions if an application for exemption from Corporate Tax has been made.
2. If an exemption has been granted, the auditor must report any breaches of the decision's conditions identified during the audit of the fund's accounting information.
3. Under specific circumstances, the Authority reserves the right to withdraw the exemption provided for private pension funds or private social security funds.

Article (7): Publication and Application of this Decision

This Ministerial Decision will be published and effective the day after its publication.

Stay informed and comply with the latest regulations to ensure smooth operations for private pension funds and private social security funds.

• Read More: Corporate Tax in the UAE: Frequently Asked Questions

• Read More: Changing of Tax Period for the Purposes of Federal Decree law No. 47 of 2022 on Corporate and Business Taxation

• Read More: UAE Allows Public Benefit Entities to Enjoy Corporate Tax Exemptions