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Exempted Entities Under the UAE Corporate Tax

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In a significant regulatory shift, the UAE has implemented a corporate tax on business earnings to elevate the nation to a top global hub for trade and investment. The UAE's corporate tax rate, which is among the lowest in the world at 9%, will provide companies with a competitive advantage. The UAE business tax is expected to go into effect on June 1st, 2023.

In light of this, companies with UAE registration are encouraged to evaluate their tax liabilities and make necessary preparations. Businesses can assure corporate tax compliance by consulting with tax professionals in Dubai. Businesses can use tax advisers to assess whether they are subject to corporate tax in the UAE.

The types of businesses that will be governed by the corporate tax regime are described in a consultation document issued by the UAE government. The paper also includes a list of companies that are free from UAE corporate tax. The companies that are free from corporate tax in the UAE are described at great length in this article. Read on to know more.

Government and Government-owned entities

The UAE corporate tax will not apply to enterprises entirely owned by the government that carry out mandated or authorized activities. Such UAE subsidiaries of government-owned companies may also request exemption from corporate tax as long as they carry out some or all of the mandated or sovereign activity or related activities.

Companies that carry out natural resources’ extraction

The UAE VAT does not apply to any income or portion of income that the government directly receives from the production and extraction of natural resources. Similar to how royalties and other tax collections made by the government from the development or exploitation of natural resources by private sector businesses will similarly be exempt from the corporate tax. However, companies involved in the extraction and exploitation of natural resources conduct these operations in accordance with long-term concession agreements with the governments of applicable emirates.

As a result, these companies must pay taxes at the Emirate level on their profits. Such long-term contracts are respected by the UAE corporate tax structure, which also allows for exemptions for income received by businesses that are subject to Emirate-level taxation. However, any suppliers, contractors, or subcontractors that the business uses are not covered by this exception. To determine whether your business qualifies for this exemption, speak with the top tax specialists in Dubai, UAE today.

Charities and Public Benefit Organizations

Since they jointly promote social or public welfare and communal or group interests with the government, charities and public benefit organizations will not be subject to UAE corporate tax. The Ministry of Finance accepts applications from organizations engaged in social, cultural, religious, charity, or other public benefit activities for exemption from UAE corporate tax. Once the Minister of Finance approves the list of the charitable organization, it will be published in a Cabinet Decision.

However, the government reserves the right to decide whether a charitable organization is eligible for the UAE's corporation tax exemption. The government won't grant organizations an exemption if they engage in commercial activities that aren't a direct part of their stated mission. Additionally, organizations whose revenue and donations are used for the personal benefit of those connected to the organization are not eligible for the exemption.

Retirement Funds and Social Security Pension

The UAE corporate tax regime will not apply to public and regulated private social security and retirement pension plans. However, throughout their life, authorized charities and public benefit organizations are required to abide by providing periodic information about requirements.

Investment Funds

Real estate investment trusts and regulated investment funds are free from corporate tax in the UAE. They are eligible to seek exemption from the corporate tax system through the Federal Tax Authority (FTA). Investment funds that satisfy the FTA's standards will be granted a tax exemption. You can get assistance from tax advisors in Dubai to seek a corporate tax exemption.

Consult with the best tax consultants in Dubai, UAE

The MoF's consultation document offers information on the corporate tax structure in the UAE, especially the categories of companies exempted. The document is available for the public to provide feedback and hence revisions can happen. Therefore, before making any decisions, companies are suggested to speak with the top tax consultants in Dubai like Alchemist Accounting. We can provide you with advice on important corporate tax rules, including the creation of tax groups, how tax losses are handled, tax exemptions, the tax liabilities of free zone firms, etc. As one of the best FTA-approved tax agents in Dubai, UAE, we can help you comply with corporate tax laws thanks to our expertise.