Requirement of Submitting a Declaration for Exempt Persons for Corporate Tax Purposes

For corporate tax purposes, Exempted Persons are required to comply with the Federal Tax Authority Decision No. 11 of 2023, which requires exempt persons to submit a declaration to confirm their eligibility, in order to maintain transparency and accountability in the corporate taxation process. Therefore, it is advisable for companies to seek the expert services of reputable Tax Consultants in UAE to effectively determine their taxability and exemption status in compliance with the corporate tax regulations.

Exempted Persons under Corporate Tax

Exempted Persons under Clause (1) Article (4) of the Federal Decree-Law No. 47 of 2022 includes:

• Persons engaged in Extractive Business
• Persons engaged in Non-Extractive Natural Resource Business
• Qualifying Public Benefit Entities
• Qualifying Investment Funds
• Public and Private Pension or Social Security Funds
• Juridical Persons Wholly Owned and Controlled by Exempt Persons keeping in view specific actions pertaining to their exempt parent businesses.
• Any other Person as determined by a Cabinet resolution following a Minister's recommendation.

Read more: Who is Exempt from the UAE Corporate Tax ?

Submission of Annual Declaration

The following exempt persons are required to submit an annual declaration in accordance with the Federal Tax Authority Decision No. 11 of 2023:

1. Qualifying Public Benefit Entities
2. Qualifying Investment Funds
3. Public and Private Pension or Social Security Funds
4. Juridical Persons Wholly Owned and Controlled by Exempt Persons keeping in view specific actions pertaining to their exempt parent businesses.
5. Any other Person as determined by a Cabinet resolution following a Minister's recommendation.

The declaration is an essential requirement that confirms exempt person ensure compliance with the Federal Tax Authority, by accurately fulfilling the legal requirements and documentation.

Requirements of the Declaration

The declaration must be submitted no later than nine months following the conclusion of the applicable Tax Period, as stated in Article 2 of Federal Tax Authority Decision No. 11 of 2023. People who are exempt from taxation are granted enough time during this period to gather the data and records needed for the declaration procedure. Exempt individuals are required to confirm two important aspects in the declaration, which include:

1.   Continuity of Fulfilling Exemption Conditions:

Exempt individuals are required to certify that they still satisfy the particular requirements listed in Federal Decree-Law No. 47 of 2022. This involves proving that their business activities meet the requirements established for the particular category of exemption. Moreover, it guarantees that the organizations are actively participating in operations that justify their exemption from corporate taxation.

2.  Validity of Records with the FTA:

Exempt individuals must also certify that their FTA records remain  up-to-date and accurate.  This include giving current details on their organizational setup, their financial condition, and any additional relevant information that might have an impact on their exempt status.

Thus, the declaration procedure serves as a thorough assessment of a person's continuing eligibility for the corporate tax exemption.  It serves as a tool for the organization and the FTA to maintain accountability, transparency, and tax law compliance.

Read more: UAE Corporate Tax (CT) 2023: Rates, Exemptions and Compliance Requirements

Significance of Submitting the Declaration

For corporate tax purposes, the submission of the yearly statement by exempt persons is crucial for both the Federal Tax Authority and the businesses exempted from corporate tax. This procedure is essential for the following reasons:

• Compliance and Accountability: The UAE tax authorities ensure that exempt persons are responsible and comply with the terms of their tax exemption by requiring the submission of annual declarations. This preserves the credibility of the tax system for corporate tax purposes.
• Verification of Eligibility: This declaration procedure enables the FTA to confirm that exempt individuals continue to satisfy the requirements for tax exemption. It guards against the abuse of tax benefits and guarantees that only approved entities receive tax exemptions.
• Transparent Record-Keeping: Exempt individuals are obligated to keep accurate and transparent financial records. This facilitates the declaration procedure and encourages effective financial management within these organizations.
• Revenue Assurance: This aids in preserving tax money for the government and upholding fiscal restraint.
• Legal Compliance: Exempt individuals are required to ensure compliance with submission of annual declarations. Failure to comply incur fines on companies.

Seek the Expert Services of Top Tax Consultants in UAE

It is advisable for companies to seek the expert services of reputable Tax Consultants in UAE to effectively determine their taxability and exemption status in compliance with the corporate tax regulations. Therefore, contact us today and we shall be glad to assist you.