Exempt Person under Corporate Tax UAE
AN EXEMPT PERSON UNDER CORPORATE TAX LAW
WHO IS ELIGIBLE TO BE CALLED AN EXEMPT PERSON UNDER CORPORATE TAX LAW IN UAE?
According to the UAE Corporate Tax Law, an exempt person is a person who may be subject to taxation but is exempt from paying it due to the application of particular legal requirements. (either an automatic exemption or a procedure-based exemption).
A person who is exempt from the legislation under the UAE Corporate Tax Law may either be exempt by default or may also seek exemption by submitting an application.
WHAT ARE THE LEGAL REQUIREMENTS UNDER CORPORATE TAX LAW TO BE CALLED AN EXEMPT PERSON?
- AUTOMATIC EXEMPTION
According to the UAE Corporate Tax Law, an exempt person is someone who is automatically exempt from corporate tax. Hence, the law clearly stipulates that some groups of people are excluded from paying taxes. For instance, the government and its departments are automatically free from the legislation since they engage in sovereign operations.
- EXEMPTION IS REQUESTED BY SUBMITTING AN APPLICATION
The exemption is requested via an application based on particular provisions that authorize them to do so. A person may submit an application for exemption under the UAE Corporate Tax Law. For instance, certain charity organizations are eligible to submit an application for exemption.
Besides, these entities are not exempt from paying corporate taxes. However, businesses have the option to request a corporation tax exemption under the provisions of the law. The government may grant such a request after reviewing it.
Who is referred to as an exempt person as specified by corporate law?
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The governments of the federal and emirate states, as well as the agencies, commissions, and other official entities.
- Businesses in the UAE that are fully owned by the Government are mentioned in a cabinet decision and that carry out a mandated or sovereign activity.
- Companies involved in the extraction and exploitation of natural resources in the UAE are taxable at the emirate level
Natural resources include things like oil, gas, water, sand, and rock deposits. The UAE Constitution grants the specific Emirate where the resource has located the authority to exploit such natural resources. The following revenue from the extraction and exploitation of natural resources:
- that the government directly earned, is exempt from corporate taxation in the United Arab Emirates.
- whatever portion of natural resource extraction and exploitation profits that the government directly receives
- royalties and other fiscal levies collected by the government from private sector enterprises engaged in the exploitation or production of natural resources
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Charities and other public benefit organizations are listed in a Cabinet Decision.
Charities and public benefit organizations are not automatically exempt from corporate tax in the UAE.
The UAE Corporate Tax Law does not automatically exclude charity and public benefit organizations from paying corporate tax. They may, however, submit a request for such an exemption to the relevant authorities.
The organizations listed below are qualified to submit an application for corporate tax exemption:
- Social and cultural foundation
- A religious institution
If an organization is found to engage in social, cultural, religious, philanthropic, or other public benefit activities, it may qualify to claim an exemption.
- Public and regulated private social security and retirement pension funds.
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Investment funds, subject to meeting the conditions:
- The UAE's Ministry of Finance-approved regulatory body oversees the investment fund in question (e.g., the Securities and Commodities Authority, the Financial Services Regulatory Authority, and the Dubai Financial Services Authority).
- A group of five or fewer investors (including their Related Parties) cannot own more than 50% of the investment fund.
- No investor has a 20% or more economic stake in the investment fund (and their Related Parties).
- Interests in the investment fund can freely exchange on a UAE stock exchange (or a reputable international stock exchange) or make the general public access to the target investor groups.
