The UAE has imposed a corporate tax on business profits to make the country a leading global hub for business and investment. It is expected to take effect on the 1st of June 2023.
As a result, businesses incorporated in the United Arab Emirates should assess their tax obligations ahead of time and prepare accordingly. Companies can ensure compliance with corporate tax laws by consulting with tax consultants in Dubai. Furthermore, tax consultants can assist businesses in determining if they are subject to UAE corporate tax.
A consultation document published by the UAE government outlines the types of entities subject to corporate tax. In addition, the composition includes a list of entities exempted from UAE company tax. This article gives an overview of the exempt entities from UAE corporation tax. Read on to learn more:
Entities owned or controlled by the government
Government-owned companies that carry out a mandated or sovereign activity will be exempt from UAE corporate tax. Furthermore, the UAE subsidiaries of such government-owned companies can also apply for tax exemption, providing they are actively engaged in the mandated or sovereign activities or ancillary activities.
Companies that extract natural resources
Royalties and other fees raised by the government from the extraction or production of natural resources are exempt from UAE VAT, as are profits earned by the government from the exploitation and extraction of natural resources. The companies engaged in natural resource extraction and exploitation have agreements with the governments of relevant emirates under which they carry out these activities on a long-term basis.
Thus, companies' profits are taxable at the level of the Emirate. Companies subject to emirate-level taxation are exempt from corporate taxes in the UAE if they have long-term contracts. However, suppliers, contractors, and subcontractors do not qualify for an exemption.
NGOs and charities
Public benefit organizations and charities are not subject to UAE corporate tax . Their responsibility is to promote the needs and interests of the general public, collective or group interests, together with the government. Nonprofit organizations engaged in social, cultural, religious, charitable, or other public benefit activities may request exemption from UAE corporate tax from the Ministry that approves the organization. The Minister of Finance will issue a Cabinet Decision listing the organization.
A charitable organization may qualify for corporate tax exemption in the UAE at the Government's discretion. However, commercial activities that are not directly related to an organization's stated purpose will not be exempted from taxation by the government. Additionally, the exemption will not apply to organizations whose incomes or donations benefit individuals associated with the organization.
Retirement and Social Security Funds
The UAE corporate tax regime exempts public and regulated private pension funds from their provisions. Nonetheless, charities and public benefit organizations must submit periodic information reporting requirements while operating.
Investment Funds
UAE corporate tax exemptions apply to investment funds and real estate investment trusts. To be exempt from the corporate tax regime, these companies should apply to the Federal Tax Authority (FTA). The FTA will approve tax exemptions for investments that meet its requirements. Tax consultants in Dubai can assist with corporate tax exemption applications.
Get the best tax consultation in Dubai, UAE
According to the MoF consultation document, many exemptions are available for entities under the UAE corporate tax regime. Further revisions may occur to the paper after public feedback. To make an informed decision, businesses are advised to consult with the best tax consultants in Dubai, as TAMCA is. TAMCA can assist you with various corporate tax matters, such as forming tax groups, treating tax losses, tax exemptions, the tax liability of free zone entities, etc. With our FTA-approved tax agents in Dubai, you will be able to comply with the corporate tax requirements more efficiently.