Corporate Tax exemptions are allocated to certain persons, classified as 'Exempt Individuals,' serving specific public interests and policy objectives, among other factors. Thus, businesses should seek the expert services of top Tax Consultants in the UAE to effectively determine taxability, avail relevant tax benefits, and ensure compliance with the corporate tax law.
Exempt Persons
Government and government-controlled entities, individuals in extractive or non-extractive natural resource businesses, and qualifying public benefit entities are exempt from applying for tax exemption.
Exempt Individuals fall into four distinct categories:
- Automatically Exempt Individuals: Comprising Government Entities.
- Individuals Eligible for Conditional Exemption: This category includes businesses involved in extraction activities and non-extractive natural resource businesses. These entities are required to notify the Ministry of Finance and adhere to specified criteria to qualify for conditional exemption.
- Cabinet-Listed Exempt Individuals: Involving Government Controlled Entities and Qualifying Public Benefit Entities, endorsed through a Cabinet Decision, contingent upon meeting relevant conditions.
- Individuals who are approved by the FTA can be exempt from taxes if they are part of public or private pension funds, investment funds, or juridical persons that are fully owned by specified entities in the UAE. Should an Exempt Individual no longer satisfy the exemption criteria, their Exempt status generally ceases, effective from the Tax Period in which the criteria ceased to apply. However, in exceptional and unforeseen circumstances, individuals can petition the FTA to maintain their Exempt status, despite temporarily not meeting the exemption conditions.
Exemption upon Notification to the Ministry and Fulfillment of Conditions
In this category, businesses dealing with extraction and non-extractive natural resources can be exempted from Corporate Tax if they satisfy certain criteria. However, if these businesses engage in an independent venture unrelated to their usual operations, comprising more than 5% of their total revenue, they must register for Corporate Tax with the FTA. As per the UAE Constitution, natural resources within each Emirate are considered public property, exposing those involved in their extraction and use to potential Emirate-level taxation. Extractive Businesses encompass activities like exploration, extraction, removal, or the generation and exploitation of natural resources. Conversely, Non-Extractive Natural Resource Businesses involve processes transforming raw, extracted natural resource products to their final sale point.
An individual can be exempted from Corporate Tax in the following situations:
- If they possess a license, right, or concession granted by a local authority to participate in their Extractive or Non-Extractive Natural Resource Business.
- Are effectively subjected to taxation under the legislation of the relevant Emirate.
- Have duly informed the Ministry of Finance regarding their Exempt Person status and compliance with the stipulated conditions.
An individual can be exempted from Corporate Tax in two situations: 1. If they possess a license, right, or concession granted by a local authority to participate in their Extractive or Non-Extractive Natural Resource Business. This restriction confines the exemption to businesses exclusively involved in transactions with other enterprises, rather than with end customers or consumers. Hence, if the person earns income from individuals not covered by the Corporate Tax Law or from any other entity not constituting a business or organized entity, they forfeit the Corporate Tax exemption privilege.
Exemption Granted through Cabinet Decision and Fulfillment of Criteria for Government Controlled Entities
Entities under Government control are legal bodies directly or indirectly overseen by one or more Government Entities. They are eligible for an exemption provided they are listed in a Cabinet Decision and satisfy certain prerequisites. For an entity to meet these criteria, it must be fully owned and managed by a Government Entity. These entities can sometimes be established independently from the Government Entity, often for reasons related to accountability or management necessities.
A Mandated Activity is a task performed by a Government Controlled Entity in line with the legal instrument that governs the entity. These activities are specified in a Cabinet-issued decision. Not all actions of a Government Controlled Entity automatically qualify as Mandated Activities. If such an entity engages in Business or Business Activities beyond its mandated scope, it becomes liable for Corporate Tax on those operations. These activities are specified in a Cabinet-issued decision. Not all actions of a Government Controlled Entity automatically qualify as Mandated Activities. If such an entity engages in Business or Business Activities beyond its mandated scope, it becomes liable for Corporate Tax on those operations.
Seek the Expert Services of Top Tax Consultants in UAE
To effectively determine taxability, avail relevant tax benefits, and ensure compliance with the corporate tax law, businesses are advised to seek expert guidance from Tax Consultants in UAE. Thus, contact us today and we shall be glad to assist you.
Mostafa is a seasoned Tax Consultant with over 5 years years of experience gained in diverse taxations matters. He has vast expertise in settling tax disputes with the Federal Tax Authority and handling of tax procedures in compliance with tax laws. He is adept in investigating underlying tax intricacies and offering expert tax advisory. He is also well-versed in conducting tax analysis’s and negotiations with the Tax Regulators, upon tax preparation and filing. Mostafa specializes in the areas of Tax law, Auditing, Accounting and Banking law.
