Provided that an application is submitted, reports are prepared and the stated purpose is adhered to

“Finance”: Exempting charities and voluntary activities from “corporate tax”

The request to exempt the organization from corporate tax is exclusively subject to the discretion of the Ministry of Finance.

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The Ministry of Finance stated that the proposed corporate tax system allows charities and public benefit organizations to apply for exemption from corporate tax, provided they comply with the preparation of periodic information reports throughout their existence.

In a consultative paper that it published, to collect the opinions and suggestions of company owners, the ministry stated that “the UAE is actively promoting corporate social responsibility, voluntary activities and community service, and is home to many charitable institutions and public benefit institutions. These institutions also play an important role by enduring A shared responsibility with the government to advance social or public welfare, societal or collective interests.”

social activities

She added that to support organizations that were formed to carry out social, cultural, religious, charitable or other activities of public benefit, the proposed system for these organizations will facilitate submitting to the Ministry of Finance a request for exemption from corporate tax in the UAE, and if the application is approved, the organization will be included In the decision of the Council of Ministers, at the request of the Minister of Finance.

The Ministry of Finance indicated that the approval of the request to exempt the organization from corporate tax is exclusively subject to the discretion of the Ministry of Finance. However, no exemption from corporate tax in the UAE will be available to organizations that carry out commercial activities, not directly related to the declared purpose or that are used Its income and donations or may be used for the personal gain of persons associated with the organization (eg founders and trustees).

She emphasized that accredited charities and public benefit organizations must comply with preparing periodic information reports throughout their existence.

government activities

And the “Finance” stated, in the consultative paper, that “while government activities are usually non-commercial in nature, the government may conduct commercial activities on its own or in cooperation with third parties,” noting that “any business activity that the government undertakes directly under a license It will be within the scope of the corporate tax system in the UAE.”

And she continued: "Companies owned entirely by the UAE government, which carry out a sovereign or costly activity in the first place, are considered an extension of the government, and these companies will be outside the scope of corporate tax in relation to their sovereign or mandatory activity."

She added, "The corporate tax system in the UAE will allow subsidiaries wholly owned by the UAE government, which undertake part or all of its sovereign or mandatory activity or that carry out additional activities, to apply for an exemption from corporate tax in the country."

It is noteworthy that the Ministry of Finance announced at the end of last January that the UAE will introduce a federal tax on business profits that will apply to the fiscal years starting on or after June 1, 2023. Businesses in the country will be subject to corporate tax from their first fiscal year starting on or after early June 2023.

The ministry said, previously, that the corporate tax policy adopted by the state reflects the recognized principles within the best international practices, noting that the system was developed with a view to reducing the burden of compliance on business.

Corporate tax will be calculated on the profits of the business based on its financial statements prepared in accordance with internationally accepted accounting standards.

It clarified that exceptions and amendments will be applied within a limited scope.

Corporate tax will apply to all businesses and commercial activities, except for natural resource extraction activities, which will remain subject to corporate tax at the local emirate level.

Companies wholly owned by the UAE government, and which carry out a sovereign or costly activity in the first place, will be outside the scope of the tax.

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