The Ministry of Finance in the UAE has recently announced that it will grant corporate tax exemption to public benefit entities, as per a new UAE Cabinet decision. This decision is important as it comes in the context of the Corporate Tax Law, which was introduced in the UAE and is effective for fiscal years beginning on or after 1 June 2023, as per Federal Decree-Law No. (47) of 2022.
Public benefit entities, often involved in areas such as religion, charity, science, education, and culture, are being granted this exemption to acknowledge their crucial role. To be eligible for exemption from UAE Corporate Tax, public benefit entities must comply with all relevant local, state, and federal laws, and notify the Ministry of Finance of any changes that may impact their status as Qualifying Public Benefit Entities. Additionally, these entities must meet the requirements outlined in Article (9) of the Corporate Tax Law.
The Cabinet has the power to modify, add, or remove entities from the list of Qualifying Public Benefit Entities based on the recommendation of the Finance Minister. Any changes that affect an entity’s ability to comply with the requirements set forth in this Decision and the Corporate Tax Law must be reported by the entity listed in the schedule attached to the decision, according to WAM.
Qualifying public benefit entities have various reporting obligations to ensure they meet the approval requirements. The Cabinet’s decision has brought more transparency to taxpayers regarding their deductible expenses under Article 33 of the Corporate Tax Law. As per this decision, donations and gifts given to a qualifying public benefit entity listed in the Cabinet Decision will be considered deductible expenses for corporate tax purposes.