UAE Corporate Tax - Tax Exemptions for Qualifying Public Benefit Entities

The Ministry of Finance (‘MoF’) has issued a Cabinet Decision No. 37 of 2023 regarding the Corporate Tax exemptions to Qualifying Public Benefit Entities(QPBE) for the purposes of Federal Decree-Law No. 47 of 2022 on the Taxation of Corporations and Businesses (‘Corporate Tax Law’).

Article 9 of the Corporate Tax Law provides the conditions to be met by a public benefit entity to be eligible for Corporate Tax exemption. Some of the conditions are summarised below:

• The entity is established and operated exclusively for religious, charitable, scientific, artistic, cultural, athletic, educational, healthcare, environmental, humanitarian, animal protection or as a professional entity, chamber of commerce, or a similar entity operated exclusively for the promotion of social welfare or public benefit.
• The entity should not undertake any other business activity except for such activities that directly relate to or are aimed at fulfilling the purpose for which it is established.
• Its income or assets are used exclusively in the furtherance of the purpose for which it was established.
• Its income or assets are not payable or made available for the personal benefit of any shareholder, member, trustee, founder or settlor (which are not itself a QPBE, Government Entity or Government Controlled Entity).
   

The key aspects of the cabinet decision are outlined below:

• The decision lists entities (Federal as well as each Eemirate) that shall be considered as exempt QPBEs, as follows:

• The list covers religious institutions, government sourced funds, sports club charities, trust clubs, school, and college welfare funds.
• The government entities shall notify the MOF of any changes occurring in listed QPBEs which affects their eligibility to qualify for tax exemption. Such notification should be made in a manner (to be prescribed by the MOF) and within (20) working days of the occurrence of the changes.
• Any government entity can also file an application to the MOF suggesting additions and deletions in to the list of QPBEs supported with any data, information and documentation as may be requested to process the application. The MOF shall suggest an addition or deletion in the list of QPBEs, which shall be acted upon by the Cabinet.
• QPBEs and government entities must provide all the relevant documents to the MOF evidencing the compliance with conditions mentioned in Article 9 of the Corporate Tax Law.

Key takeaways

• One of the eligibility conditions for QPBEs is that its income or assets are not payable or made available for the personal benefit of any shareholder, member, trustee, founder or settlor. This condition is very difficult to satisfy for a privately owned public benefit entityies.
• Even though QPBEs shall be fully exempt from Corporate Tax but it shall be required to take Corporate Tax registration as such entities are not covered by earlier Ministerial Decision No. 43 of 2023 issued in connection with Exception from Corporate Tax Registration.
• Any donations, grants or gifts made to listed QPBEs shall be a deductible expenditure for Corporate Tax purpose.

How can we help?

A public benefit entity can evaluate its eligibility to meet conditions mentioned in Article 9 of the Corporate Tax Law and enjoy tax exemption. Our tax experts can help entities with the analysis, assist with filing application to the MOF and get listed in the Cabinet Decision.