UAE Allows Public Benefit Entities to Enjoy Corporate Tax Exemptions

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26 Apr 2023

According to the Ministry of Finance, a new UAE Cabinet decision has been issued regarding 'qualifying public benefit entities,' pursuant to which public benefit entities will now be exempt from corporate taxation.

Specifically, the Corporate Tax Law provides the legislative basis for introducing and implementing a Federal Corporate Tax in the UAE, which will become effective on or after 1 June 2023. In December 2022, the United Arab Emirates enacted Federal Decree-Law No. (47) of 2022 regarding the taxation of corporations and businesses.

Exemptions like this one are designed to recognize the significant role that public benefit entities play, including organizations focused on areas such as religion, charity, science, education, and culture.

It is imperative that these entities continue to comply with all local, state, and federal laws and notify the Ministry of Finance of any changes that might affect their status as Qualifying Public Benefit Entities. In addition, these entities must meet the requirements of Article (9) of the Corporate Tax Law.

Upon the recommendation of the Finance Minister, the Cabinet can change, add, or remove entities from the list of Qualifying Public Benefit Entities.

Changes affecting a business's ability to continue to meet the requirements of this Decision and the Corporate Tax Law must be reported by the entity listed in the schedule attached to the decision.

In order to maintain their eligibility for approval, qualifying public benefit entities are required to submit various reports.

As a result of the Cabinet's decision, taxpayers now have greater clarity and transparency regarding their deductible expenses under Article 33 of the Corporate Tax Law, as deductible expenses will be recognized for corporate tax purposes if gifts and donations are given to an entity listed in the Cabinet Decision that qualifies as a public benefit organization.

Unlike many other countries, the UAE's corporate tax regime is based on self-assessment, which means that businesses must make certain that the documents they submit are correct and in compliance with the law.

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