In a “consultative paper” that does not represent final legislation

«Finance»: 6 categories are exempt from corporate tax

The Ministry of Finance invited the business community to comment on corporate tax saying that it is desirable to focus on aspects of the proposed corporate tax system, which may help reduce compliance cost, complexity, and improve confidence for both the tax administration and the taxable person.

A consultative paper identified six categories that are exempt from corporate tax, either automatically or through the application of the provisions of the law, which are: the federal government, the governments of the UAE, its departments, bodies, and other public institutions, companies wholly owned by governments, practicing a sovereign or costly activity and listed in the Cabinet decision, and companies Working in the field of extracting and exploiting the UAE’s natural resources that are subject to tax at the emirate level, charitable foundations and other organizations of public interest listed in the Cabinet Resolution, private social security funds and public and organized pension funds, then investment funds that comply with the conditions specified in the consultative paper.

The Ministry of Finance called for the inclusion of clear and concise notes where possible, with examples, data or other information, to support views on the main features and the application of the corporate tax system in the UAE.

She explained that the general consultative paper contains information about the proposed corporate tax system in the UAE, and is issued for the purposes of obtaining stakeholders' views, and does not reflect the final view of the government, nor does it aim to present all possible aspects of the proposed corporate tax system in general, nor should be used or relied upon to make individual or business decisions because they do not represent the final legislation.

The consultative paper included all details related to the application of the tax, free zones, and taxable income, as well as methods for calculating taxable income, noting that comments should be sent by May 20.

On January 31, 2022, the Ministry of Finance announced that it would introduce a federal tax on “business” profits that would apply to fiscal years beginning on or after June 1, 2023.

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