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Which Entities are not Subject to UAE Corporate Tax?

UAE corporations ought to pay corporate tax on their taxable revenue in the UAE. Corporate tax may be referred to as "Corporation Income Tax" or "Business Tax" in various jurisdictions. The United Arab Emirates corporation tax rate of 9% is among the most affordable in the world, giving local companies an advantage over their competitors. In light of this, UAE-based corporations should evaluate their tax liabilities and make necessary preparations in advance. Employing the services of corporate tax advisors helps corporations to stay compliant with the Federal Tax Authority’s standards and to avert penalties for noncompliance. Thus, it is imperative for companies to seek expert consultation from accredited tax consultants in UAE.  

Entities That Are Exempted From Corporate Income Tax UAE

There are notable exceptions under the UAE corporate tax, the following is a list of businesses or companies that are not required to pay UAE corporation tax as per the Federal Decree Law no. 47 of 2022;

  1. Government Authorities and Government-controlled Companies

Companies owned or administered by the government and working for the public good and that do not engage in commercial operations are exempt from paying Corporate Tax. If the government or a government-owned company is conducting commercial activities under a trade license, the income generated by such activities is subject to corporate tax.

  1. Firms That Are Engaged in the Extraction of Natural Resources

The Emirate that contains a natural resource is legally recognized as the resource's owner under UAE law. The Emirate requires natural resource extraction companies to comply with its laws and pay more taxes now at the State level. Companies that harvest and replace fossil fuels that are taxed at the Emirate level would be exempt from the Corporate Tax, which is a federal tax. Both extractive and non-extractive businesses can be exempt from corporation tax if they meet the terms and conditions as described in the Federal Decree Law no 47. 

  1. Foundations and National Benefit Organizations 

Since the UAE government considers charities and federally funded institutions to be partners in advancing public good and collective interests, they will be excluded from paying the country's corporate income tax. The Ministry of Finance of the United Arab Emirates will consider requests for business tax exemptions from organizations engaged in social, cultural, religious, philanthropic, or other public funding activities. As soon as the charity is authorized, the Treasurer may ask the Cabinet to make a Cabinet Decision naming the ministry as a sponsor. Whether a nonprofit organization is eligible for the UAE's corporate tax exemption or not is ultimately up to the government. Organizations engaging in financial enterprises that are just not closely tied to their declared mission will not be granted an exemption by the government. To add insult to injury, the exception will not be granted to groups whose leaders exploit their positions to enrich themselves financially (e.g., the founders and fiduciaries).

  1. Investment Funds

For tax reasons, investors prefer that investment funds be organized as limited partnerships instead of just corporations. To put investors in a similar tax position as if they had invested indirectly in the fund's underlying assets, the UAE and worldwide investment funds, some of which are set up as unregistered partnerships, are intended to be seen as financially transparent by the Corporate Tax system. Through the UAE Tax Authority, they may apply for corporation tax exemption (FTA). If investment funds meet the FTA's requirements, they will be excluded from paying taxes. To avoid any confusion, it is better to consult the tax advisor.

  1. Government-run or Regulated Private Social Security and Retirement Pension Schemes

Government-run and regulated private pension and social security systems are exempt from Corporate Tax. For effective corporate tax implementation, individuals, if relevant, must re-access their situation in light of the above-mentioned requirements and take the necessary steps.

  1. Juridical Persons

Any juridical person that runs inside the UAE and that is completely governed and owned by an exempted business is also exempt from paying corporate tax in UAE. 

Choose the Best Corporate Tax Services in UAE

It is highly advisable to seek the expert services of top tax consultants in UAE to have a detailed insight into the UAE corporate tax’s scope and to avert probable fines for noncompliance. Thus, contact us today and we shall be glad to assist you!

Read More : Who Is Subject to the Corporate Tax in UAE?

Ervee is a CPA with international experience in Tax and Accounting. He has over 12 years of experience in accounting and bookkeeping and over a year in VAT implementation, registration, and accounting in UAE. He regularly drives out inefficiencies in company operations and loves the challenge of helping clients find additional ways for an easier and improved compliance and verification of transactions.