UAE to offer corporate tax relief to ‘public benefit’ entities

The UAE Ministry of Finance (MoF) said public benefit entities that contribute to the welfare of society are eligible for tax exemptions under the country’s corporate tax law.

“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,” the ministry of finance said in a tweet.

The tax exemption is aimed at designed to reflect these entities’ important role in the country, which often includes religious, charitable, scientific, educational or cultural value. The UAE said to qualify for the exemption, eligible entities must meet the conditions specified in Article 9 of the corporate tax law and must maintain compliance with all relevant federal and local laws.

The ministry called on all qualifying public benefit entities to register with the UAE Federal Tax Authority and obtain a tax registration number for corporate tax purposes.

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

The entities must also inform the ministry of any changes that may affect their status as qualifying public benefit entity.

UAE corporate tax exemptions

Meanwhile, the UAE introduced the federal corporate tax with a standard statutory rate of 9 per cent, which is set to come into effect for businesses whose financial year starts on or after June 1, 2023. The corporate tax represents a significant shift for a country that’s long attracted businesses from around the world, thanks to its status as a tax-free business hub.

Read:UAE reveals list of entities exempted from corporate tax

The government has announced a raft of measures ahead of the introduction of corporate tax.

Earlier in April, the UAE said government entities, government-controlled entities, as well as extractive businesses and non-extractive natural resource businesses that meet the necessary conditions under the corporate tax law will be exempted from tax and not required to register.

Similarly, the authority is exempting non-resident persons from registering for corporate tax if they “only” earn UAE-sourced income and do not have a permanent establishment in the country.

The government is also exempting existing free zone entities from corporate tax as they are among the drivers of the country’s non-oil economy.

The ministry of finance also issued a new ministerial decision on Small Business Relief, allowing small businesses with revenues of $816,880 (Dhs3m) or less to claim tax relief in a tax period when their revenue does not exceed a certain threshold.

Small Business Relief seeks to support startups and other small or micro businesses by reducing their corporate tax burden and compliance costs. It was issued in accordance with Article 21 of the corporate tax law, “which treats the taxable person as not having derived any taxable income in a given tax period where the revenue did not exceed a certain threshold.”

In December 2022, the government also issued the federal corporate tax law, bringing the income of companies exceeding Dhs375,000 into the corporate tax bracket. The Gulf state announced that it will impose a federal levy on corporate earnings in January 2022, dismantling a tax-free regime that’s made it a magnet for global business.

However, Moody’s said in February 2022 that the corporate tax will broaden the government’s income base, but it negatively affects the credit profiles of companies operating in the Middle East business hub.

Read: UAE to offer corporate tax relief to small businesses