The United Arab Emirates has a well-established business-friendly environment, and it is crucial for all business owners to be aware of the laws and regulations that govern their activities.
One such regulation is the UAE Corporate Tax, which has been implemented recently to increase revenue and promote economic growth.
In this blog, we will be discussing the exempt persons under the UAE Corporate Tax law and what it means for businesses operating in the country.
Understanding the exemptions from the UAE Corporate Tax is crucial for companies operating in the UAE, as it helps them determine their tax liabilities and plan their finances accordingly.
It also helps companies to ensure that they are operating within the boundaries of the law, avoiding any potential penalties or legal issues.
So, whether you are a small start-up or a large multinational corporation, this information is essential for you to know.
Following entities are exempt form UAE Corporate Tax.
Government entities including the Federal Government, Local Governments, Ministries, Government departments, its agencies, Authorities and Public Institutions of Local and Federal Governments.
Federal Government – The federal government of the United Arab Emirates is the governing body that oversees the entire country, including the 7 emirates.
Ministries – The federal government has several Ministries that are responsible for specific areas such as Education, Health, and Finance.
Authorities – Authorities in the UAE refer to independent organizations that are responsible for specific areas, such as the Telecommunications Regulatory Authority and the Dubai Electricity and Water Authority.
Public Institutions – Public institutions in the UAE refer to organizations that are owned and operated by the government, such as Dubai Municipality and Abu Dhabi National Oil Company.
Local Governments – Local governments refer to the governing bodies of each emirate, such as the government of Dubai and the government of Abu Dhabi.
Government departments – Government departments refer to the various departments within the federal government and local governments, such as the Department of Health and the Department of Economic Development.
Agencies – Agencies refer to organizations that are established by the government to carry out specific functions, such as the Dubai Tourism and Commerce Marketing Agency.
Any juridical person directly or indirectly wholly owned and controlled by any of the above Government entities.
An example of a juridical person that is directly or indirectly wholly owned and controlled by a government entity would be a government-owned corporation or a state-owned enterprise.
This could be a company that provides essential services such as water, electricity, or transportation, or a company that operates in industries such as energy, mining, or telecommunications.
These companies may be owned directly by the government or by a government-owned holding company, but they are still considered exempt from corporate tax in the UAE under the provisions described above.
Businesses engaged in exploring, extracting, removing or otherwise producing and exploiting natural resources.
An example of a business that would be exempt from corporate tax in the UAE as it is engaged in exploring, extracting, removing or producing and exploiting natural resources would be an oil and gas company.
This could be a company that is involved in the exploration, extraction, refining, and marketing of oil and gas.
These businesses are considered exempt from corporate tax in the UAE as they play a crucial role in the development of the country’s economy and are seen as contributing to the public good.
The exemption from corporate tax helps these companies to invest more in their operations, thereby increasing their output and contributing to the economy.
Businesses engaged in separating, treating, refining, processing, storing, transporting, marketing or distributing natural resources.
An example of a company engaged in the business of separating, treating, refining, processing, storing, transporting, marketing, or distributing natural resources in the UAE is Emirates National Oil Company (ENOC).
ENOC is a state-owned company that manages the exploration and production of oil and gas resources in the UAE, as well as the processing, storage, and distribution of refined petroleum products.
The company operates a network of refining and processing facilities, storage tanks, and pipelines, and is responsible for the marketing and distribution of refined petroleum products throughout the UAE and beyond.
Public benefit entities exclusively for religious, charitable, scientific, artistic, cultural, athletic, educational, healthcare, environmental, humanitarian, animal protection or other similar purposes.
An example of a public benefit entity that may be exempt from UAE corporate tax could be a nonprofit organization focused on environmental protection, such as the Emirates Wildlife Society.
This organization operates in the UAE and is dedicated to promoting wildlife conservation and preserving the country’s natural heritage.
As a public benefit entity, it meets the conditions set by the Ministry of Finance and is listed in a decision issued by the cabinet, which makes it eligible for exemption from corporate tax.
Entities whose principal activity is the issuing of investment interests to raise funds or pool investor funds.
An example of an entity whose principal activity is the issuing of investment interests to raise funds or pool investor funds or establish a joint investment fund with the aim of enabling the holder of such an investment interest to benefit from the profits or gains from the entity’s acquisition, holding, management or disposal of investments is a mutual fund company.
Mutual funds are investment companies that pool money from many investors to buy a diversified portfolio of stocks, bonds, or other securities.
The investment interests, in this case, would be the mutual fund shares that individual investors can purchase, which gives them a piece of the underlying portfolio and exposure to the profits or gains from the entity’s acquisitions, holdings, management, or disposals of investments.
Public pension or social security fund, or a private pension or social security fund that is subject to regulatory oversight.
An example of a public pension or social security fund is the United Arab Emirates General Pension and Social Security Authority.
A private pension fund can be a company’s retirement savings plan for its employees, provided it is subject to regulatory oversight and meets the conditions prescribed by the Minister of Finance.
A juridical person incorporated in the State that is wholly owned and controlled by an Exempt Person specified in paragraphs above and conducts any of the following:
a) – Undertakes part or whole of the activity of the above Exempt Persons.
b)- Is engaged exclusively in holding assets or investing funds for the benefit of the Exempt Person.
c)- Only carries out activities that are ancillary to those carried out by the Exempt Person
Any other Person as may be determined in a decision issued by the Cabinet.
Understanding the exemption criteria can help business owners determine if they qualify for tax-free status and save significant amounts in taxes. Stay up-to-date on the latest UAE Corporate Tax regulations and ensure compliance with this comprehensive guide