UAE Extends Corporate Tax Exemption to Public and Community Welfare Entities

In a move aimed at recognizing the significant contributions of entities dedicated to public and community welfare, the UAE Ministry of Finance has announced an exemption from corporate tax for such organizations. This exemption is set to take effect this year, providing a significant incentive for entities engaged in philanthropy, community services, and corporate social responsibility initiatives.

The Ministry’s statement clarified that entities whose primary focus lies in areas such as public welfare, philanthropy, community service, and corporate social responsibility will be eligible for the corporate tax exemption. The decision underscores the crucial roles these entities play in the UAE’s society, often involving endeavors related to religious, charitable, scientific, educational, and cultural values, among others.

The UAE’s corporate tax, which was introduced last year, levies a nine percent tax on companies and freelancers earning Dh375,000 and above. The country’s corporate tax rate is notably among the lowest in the world.

To qualify for this exemption, entities must meet the conditions outlined under Article (9) of the Corporate Tax Law. Additionally, they must remain compliant with both federal and local regulations and notify the Ministry of Finance of any changes that might impact their status as a Qualifying Public Benefit Entity.

Further requirements include registering with the Federal Tax Authority and obtaining a Tax registration number specifically for Corporate Tax purposes.

The Ministry indicated that the Cabinet retains the authority to revise the list of Qualifying Public Benefit Entities upon the Minister’s recommendation. Such revisions may involve the addition, removal, or modification of entities. Entities listed in the schedule attached to this decision are obligated to promptly inform authorities of any changes that occur.

This Cabinet Decision also brings clarity and transparency to taxpayers concerning their deductible expenditures as per Article 33 of the Corporate Tax Law. Donations and gifts made to Qualifying Public Benefit Entities listed in the Cabinet Decision will be considered deductible expenditures for Corporate Tax purposes.

In earlier announcements, the Ministry had extended corporate tax exemptions to non-resident persons, government entities, government-controlled entities, as well as businesses in extractive and non-extractive natural resource sectors. This recent development underscores the UAE’s commitment to fostering a supportive environment for a diverse range of entities contributing to the nation’s welfare and progress.

CA Amarakoon Susantha

CA Amarakoon Susantha

AM Susantha is an experienced Tax Advisor at NAM Accountants in Dubai, with expertise in corporate and international taxation. He offers tailored tax solutions that align with clients' financial goals.

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