Exemptions in the UAE corporate tax law

The difference between a person and income exempted in corporate tax in UAE with the tax agent Mr. Moustafa Hosny

As the exempted persons in the corporate tax law can be divided into 4 categories:-

The first group is exempt without applying for an exemption

A-the government entity

B- Government-affiliated entity

The second group is exempt in case of notification to the ministry

A- A person who carries out extractive work who meets the conditions stipulated by law

B - A person engaged in the practice of non-extractive Natural Resource business who meets the conditions stipulated by law

The third group is exempted by a ministerial decision

A- A public utility entity qualified under Article 9 of the law

The fourth group is exempt from submitting an application to the authority

A- The investment fund qualified under Article 10 of the law

B- The public pension or social insurance fund or the private pension or social insurance fund that is subject to regulatory control by the competent authority in the state that meets any other conditions specified by the minister

C- A legal person established in the country that is fully owned and fully controlled by an exempt person specified as follows:-

o Government entity

o Government-affiliated entity

o Qualified investment fund

o the public and private pension or social insurance fund that is subject to regulatory control by the competent authority in the state that meets any other conditions specified by the minister and that practices any of the following :-

Carrying out the activity of the partially or completely exempted person

1-carrying out the activity of the partially or completely exempted person

2-carrying out exclusively activities in support of the activities carried out by the exempted person

D-any person who may be identified by a decision issued by the Council of ministers based on the proposal of the minister

When are you exempt from corporate tax

Article 5 and Article 6 of the law established the cases of subordination of exempted persons

* Government entity is subject to corporate tax if it conducts business or business activity under a license issued by a licensing entity

- Government agencies should maintain separate financial statements for these businesses separately

- The government entity must calculate the private income from business or business activities independently for each tax period

- Transactions between the government entity and business or business activities are considered transactions between related parties

*Government-affiliated entity is subject in the event that it is engaged in business or business activities that are not among the activities assigned to it

- These businesses are treated as independent activities and the government entity must maintain financial statements separately

- The government entity calculates the taxable income for business or business activities that are not its assigned activity independently for each tax period

- Transactions between the business or the activity of the subject business and other activities carried out by the entity affiliated with the governance are considered transactions between related parties

* Extractive Natural Resource Works are subject in case they do not meet the conditions stipulated by the law

- Does not have or has an interest directly or indirectly in the right or privilege issued by the local government to carry out extractive works

- Not subject to local tax in the emirate, Whether it is a profit tax, income tax, franchise right, tax on revenues or any kind of taxes and fees related to extractive works

- Did not submit a notification to the ministry in accordance with the forms and procedures agreed with the local government

* Non-Extractive Natural Resource Works are subject in case they do not meet the conditions stipulated by the law

- Does not have or has an interest directly or indirectly in the right or privilege issued by the local government to conduct non-extractive Natural Resources business activities

- His income from the work of non-extractive natural resources shall not be exclusively from persons engaged in business or business activity

- Not subject to local tax in the emirate, Whether it is a profit tax, income tax, franchise right, tax on revenues or any kind of taxes and fees related to extractive works

- Did not submit a notification to the ministry in accordance with the forms and procedures agreed with the local government

* Public benefit entities are subject in case they do not meet the conditions stipulated in Article 9 of the law

- Not established for the following purposes ( religious-charitable-scientific-artistic-cultural-sports -educational-health-environmental-humanitarian-Animal Protection-other similar purposes

- Did not work exclusively to promote social welfare or public interest

- To conduct business or business activities that are not related to or aimed at the purpose for which it was established

- Did not use its assets or income exclusively to serve the purpose for which it was created

- There should be a personal benefit for the members or shareholders or the secretary or founder of these entities by paying any part of their income or using their assets

* The investment fund is subject in case of non-fulfillment of the conditions stipulated in Article 8 of the law

- If the fund is not subject to regulatory control from a party inside or outside the country, it shall be approved

- The shares are not traded on the approved stock market or are not adequately provided to investors

- The main or main objective of the fund should be to avoid corporate tax

The calculation of taxable income does not include income and expenses associated with the following:-

1-dividends or distributions from a resident legal person

2-dividends of shares or shares and other distributions the profits obtained from participation shares in a foreign person, participation shares means owning ownership shares of (5%) or more in the shares or capital of a legal person, or the cost of acquiring shares is equal to or exceeds 4 million dirhams if the following conditions are met :-

A -The taxable person retains the participation shares or expresses a desire to keep them for a continuous period of at least 12 months

B -The participation is subject to corporate tax or any other tax similar to corporate tax imposed in accordance with the legislation of another foreign country at a rate of not less than 9%

C- The owned share in the taxable participation shall qualify to receive (5%) of the profits available for distribution and at least (5%) of the liquidation proceeds as a result of the end of the participation

3-any other income resulting from the participation shares provided for in Article 23 of the articles of the corporate tax law

4-exemption of the permanent foreign establishment, where the permanent foreign establishment must be subject to corporate tax or any other similar tax under the applicable legislation of the other country at a rate not less than 9%

Exempt persons do not enjoy the following tax facilities:-

1-small business facilitation does not apply to them

2-business restructuring facilities do not apply to them

3-the transfer facilities within the qualifying groups do not apply to them

4-it does not apply to them to transfer the losses transferred to other persons

5-the possibility of working a tax group does not apply to them

1-income from real estate investment without a license

2-the resulting income for wages and salaries

3-income from private investment

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