The decision reflects its important role in the religious, charitable, scientific, educational or cultural fields

«Finance»: Exempting public and community benefit entities from «corporate tax»

«Finance»: The Council of Ministers may amend the list of qualified public benefit entities. Archival

The Ministry of Finance has unveiled the Cabinet's new decision on eligible public benefit entities for the purposes of the Corporate Tax Law. The decision aims to ensure that entities are exempted from corporate tax established to work to achieve the public benefit, in accordance with Cabinet Resolution No. (37) of 2023, regarding eligible public benefit entities for the purposes of Federal Law by Decree No. 47 of 2022 regarding corporate and business tax.

Qualified public benefit entities work for the well-being of people and society, and focus on activities that contribute to strengthening the social fabric of the UAE, public welfare activities, philanthropy, community services or corporate social responsibility.

The new regulatory decision reflects the important role of these entities in the UAE in the religious, charitable, scientific, educational, cultural and similar fields. To be eligible for exemption from corporate tax, public benefit entities must meet the conditions set out in Article (9) of the Corporate Tax Law, and must continue to comply with all relevant federal and local laws, and must notify the Ministry of Finance of any changes that may affect its status as an eligible public benefit entity.

Eligible public benefit entities must also register in the corporate tax system with the Federal Tax Authority and obtain a tax registration number for corporate tax purposes.

The Council of Ministers may amend the list of qualified public benefit entities, based on a proposal from the Minister to update, add or delete any entities. The entity listed by the Cabinet decision shall send a notification of any changes that may affect its continuity in fulfilling the conditions stipulated in the decision and in the Corporate Tax Law.

Reporting obligations apply to eligible public benefit entities, for the purpose of verifying that they continue to meet the criteria for obtaining exemption. This decision provides more certainty and transparency to taxpayers, regarding their deductible expenses, under Article (33) of the Corporate Tax Law, as it will allow grants and gifts to be treated as deductible expenses for corporate tax purposes, if they are provided to a qualified public benefit entity listed in the Cabinet decision.

The Ministry of Finance recently issued Ministerial Resolution No. (43) of 2023 regarding the exemption from tax registration for the purposes of Federal Law by Decree No. (47) of 2022 regarding corporate and business tax (Corporate Tax Law) in the UAE.

The Ministerial Decision regarding the exemption from tax registration was issued in accordance with the provisions of Article (51) of the Corporate Tax Law, which obliges taxable persons to register for corporate tax with the Federal Tax Authority, except in certain cases.

The ministerial decision on exemption from tax registration determines the persons who will be excluded from registration for corporate tax. Some persons exempt from corporate tax, such as government and government entities, as well as extractive and non-extractive natural resource works, who meet the requirements specified under the Corporate Tax Law, were excluded from tax registration for the purposes of the Corporate Tax Law. A non-resident is also excluded from corporate tax registration if he only earns income originating in the country, and does not have a permanent establishment in the country.

The Ministry also issued Ministerial Resolution No. (73) of 2023 regarding small business facilities for the purposes of Federal Law by Decree No. (47) of 2022 regarding corporate and business tax (Corporate Tax Law).

The Ministerial Decision on "Small Business Facilities" specifies the mechanism for implementing the provisions contained in Article (21) of the Corporate Tax Law, which stipulates that a taxable person shall be treated as a person who did not achieve any taxable income during the specified tax period, during which his revenues did not exceed a certain limit.

The Small Business Facility aims to support startups and other small or micro businesses by reducing corporate tax burdens and compliance costs. The Ministerial Decision on Small Business Facilities sets out the revenue limit and the conditions that a taxable person must meet to choose to benefit from small business facilities, as well as clarifies the provisions for carrying forward tax losses and non-deductible net interest expenses for the purposes of benefiting from small business facilities.

• Eligible public benefit entities must register in the corporate tax system and obtain a tax registration number.

• Grants and gifts will be allowed to be treated as deductible expenses for tax purposes, if they are provided to a qualified public benefit entity.