A qualifying public benefit entity is an organization founded by private individuals, public agencies, or both to carry out socially beneficial activities, i.e., charity, culture, religion, or other public causes, as per Article 9 of the corporate tax UAE without trying to turn a profit for private investors.
Certain businesses are subject to the UAE Corporate Tax Law, except charitable organizations, educational institutions, and professional associations, which are recognized for their vital role in serving society without pursuing personal gain. So long as qualifying public benefit entities follow specific guidelines and procedures, they are exempt from corporate tax under the Corporate Tax Law. An entity that provides public benefits might be either a natural person, like a sole proprietor, or a juridical person, like a foundation, society, or association. A public benefit entity may be founded and registered with a presence in the United Arab Emirates, following the laws of the UAE or foreign jurisdiction.
Subject to an exception from the Federal Tax Authority, a qualifying public benefit entity is not needed to file tax returns or pay taxes on its income or earnings. There are a few instances of UAE-based public benefit organizations. The UAE Qualifying Public Benefit Entities, as specified in Cabinet Decision No. 37 of 2023, that entities existing and operating for the wider public benefit are eligible for tax exemption. The Emirates Foundation, the Abu Dhabi Chamber of Commerce and Industry, the Dubai Culture and Arts Authority, the Emirates Red Crescent, the Environment Agency-Abu Dhabi, and a foreign organization with a presence in the United Arab Emirates and fulfillment of the requirements may also qualify as a public benefit entity.
To enjoy exemption, a qualifying public benefit entity is required to satisfy the conditions outlined under Article 9 of corporate tax UAE as stated below:
A Qualifying Public Benefit An entity might be a professional group or chamber of commerce, a professional group, an advancement organization of social welfare issues, or an institution making efforts related to the environment, science, art, sports, education, religion, culture, and other issues related to humanitarianism. The conditions regarding establishment and operations should be satisfied. The objective of such organizations should be in line with the laws of the United Arab Emirates and all other applicable standards and regulations without any conflict.
Some examples of qualifying a public benefit entity from an operation and establishment perspective are:
An entity does business operations for benefits and gain. Still, a qualifying public benefit entity does business only if it is directly related to the objective that it was founded to pursue as per the Corporate Tax Law. Business operations are consistently carried out to achieve the objectives approved by law. The entity must show that it abstains from activities against the objectives and makes sure that its income goes towards the general welfare of the people rather than the personal benefits of its associates, members, or owners.
The resources of a qualifying public benefit entity can be utilized for the original objectives of the organization, restricted to the payment of necessary relevant expenses, by maintaining the accounts transparent and accountable in line with the purposes of public benefit.
The income and assets of a qualifying public benefit entity may only be used to support the objectives for which it was founded or to cover any related, reasonable, and necessary costs. This means that the organization must use all of its resources, including income, to achieve its public benefit objective or pay for any charges or expenses that are justly and reasonably incurred. For instance, the organisation might use its earnings or assets to pay staff or volunteers, finance programs or projects, maintain buildings and equipment, or fulfil legal obligations. It is also clarified that no assets or income of a qualifying public benefit entity can be used for the personal gain of the settlor, founder, trustee, shareholder, or member. For instance, the entity will not give such people salaries, commissions, bonuses, fees, loans, gifts, or other advantages unless they are fair and commensurate with the services they perform.
No individual associated with the organization can personally benefit from its earnings or assets unless they are also part of a qualifying public benefit entity or government-controlled entity. Transactions with individuals must adhere to fairness, market value, and arm's length principles.
A public benefit organization that satisfies the aforementioned requirements should apply to the appropriate local or federal government agency with which it is registered to request the corporate tax exemption. The following data and files must be included in the application:
After reviewing the application, the competency authority may audit or examine the entity to make sure all requirements and conditions are satisfied as per the UAE Corporate Tax Law. The Ministry of Finance will be consulted to incorporate the matter into a Minister to Cabinet memo after their satisfaction. The Federal Tax Authority will incorporate the entity in the Cabinet decision list as a qualifying public benefit entity. Unless the Federal Tax Authority requires it differently, the entity will therefore be exempt from corporate tax.
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