Understanding Corporate Tax in UAE: Public Benefit Entity Status and Exemptions

In the United Arab Emirates (UAE) public welfare and societal development have special privileges and regulation under Corporate tax framework. Corporate Tax Law provides an exemption from Corporate Tax for Qualifying Public Benefit Entities due their cause for public welfare and society. 

“Public benefit entity” is organisation formed by private individuals/government/non-governmental bodies for the purpose of carrying out charitable, social, cultural, religious, or other public benefit. They do not have a motive of making a profit for distribution to private Persons.   

According to the Corporate Tax Law, a qualifying Public Benefit Entity must meet specific conditions outlined in Article 9 of the legislation and/or has been officially listed in a decision issued by the Cabinet at the recommendation of the Minister. 

The conditions include: 

Purpose: The entity must be established and operated exclusively for charitable, scientific, cultural, educational, healthcare, environmental, humanitarian, or similar purposes. Entities that also function as a professional entity, chamber of commerce, or similar body dedicated solely to promoting social welfare or public benefit fall into the category. 

 Non-Business Activities: A Qualifying Public Benefit Entity is barred from engaging in business or business activities, except those directly related to its established purposes.  

Utilization of Income and Assets: All income and assets of the entity should be utilized exclusively for its intended purpose or for related reasonable expenses. 

 Non-Personal Benefit: None of the entity's income or assets should be payable to or available for the personal benefit of any individual shareholder, member, trustee, founder, or settlor unless they themselves are a Qualifying Public Benefit Entity, Government Entity, or Government Controlled Entity. 

Special Conditions: The Cabinet may impose further conditions through decisions issued from time to time. 

 Entities seeking qualifying Public Benefit Entity status must apply to the relevant local or federal government entity under which they are registered. Foreign organizations with a presence in the UAE may also qualify if they meet the stipulated criteria and are listed in the relevant Cabinet Decision.  Approval typically takes effect from the beginning of the tax period in which the entity is included in the Cabinet Decision. However, the Cabinet reserves the right to grant earlier effective dates if the entity has complied with all necessary requirements.  

Public Benefit Entities encompass a wide array of organizations dedicated to various causes, including but not limited to:  

• Charitable foundations 

• Educational institutions 

• Healthcare facilities 

• Cultural and arts organizations 

• Environmental conservation groups 

• Humanitarian aid agencies 

• Religious institutions 

In the UAE, through tax exemptions, the government aims to encourage and support the Public Benefit Entities in their noble endeavors which play a significant role in driving positive social change and community development.  

  By meeting the specified requirements and completing the necessary approval procedures for the Corporate Tax exemption, entities can attain this privilege. This is indeed is a great initiative for them to make significant contributions to societal advancement without being subjected to corporate taxation.