Corporate Tax Exemption for Public and Community Welfare Entities in UAE

Public and Community Welfare Entities are non-profit organizations established to provide public services, support social welfare, or promote charitable activities. Their primary focus is on benefiting the community rather than generating profits. Examples of such entities include charitable organizations, foundations, non-governmental organizations (NGOs) and other specific types of non-profit associations. Corporate Tax Law in UAE furnishes exemptions to Public and Community Welfare Entities to entities, thus it is advisable for Taxable Persons to consult Tax Consultants Dubai to effectively determine their taxability in compliance with the statutory law.  

Exempted Entities

It is important to note that exemption does not extend to income derived from commercial activities that are not directly related to their core objective of providing public benefits.

The corporate tax exemption applies to the following:

• Government agencies: Certain government agencies are exempted from corporate tax.
• Exemptions for Private Pension Funds: Private pension funds are eligible for tax exemptions under specific conditions, which include:
• Assets designated for pension plans: The fund's assets must be legally or contractually designated for pension plans or acquired with contributions solely intended for pension benefits.
• Right to sue: The fund must provide pension plan beneficiaries or members the right to sue for owed money based on a contract.
• Limited income: The income of the fund should be limited to the specified income in the ministerial decision.
• Fund auditor: An auditor for the fund is required to ensure compliance and transparency.

Read more: Exempt businesses under corporate tax in UAE

Exemptions for Private Social Security Funds

Private Social Security Funds can also qualify for tax exemptions if they meet the following criteria:

• Designated fund assets: The fund's assets must be designated as fund assets by statute or agreement or acquired with contributions solely intended for End of Service Benefits.
• Limited income: Only the income specified in the ministerial decision is considered for the fund's income.
• Fund auditor: Similar to private pension funds, a fund auditor is required for compliance and transparency.

Read more: Provisions of Exemption from Corporate Tax in UAE

Other Exempted Entities

Other organizations that qualify for corporate tax exemptions include: 

• Pension or investment funds: These funds, established for retirement benefits or investment purposes, can also qualify for exemptions.
• Free zone businesses: Current free zone businesses, which are significant drivers of economic growth in the UAE, are exempt from corporate income tax.
• Eligible charities: Charitable organizations that meet specific reporting requirements can also be eligible for tax exemptions.

Conditions for Public and Community welfare entities

Public and Community welfare entities are required to comply with the reporting and disclosure requirements specified by the relevant regulatory authorities. This includes submitting annual financial statements, providing details of their activities and beneficiaries, and maintaining proper records of their operations. Compliance with these requirements is essential to maintain their eligibility for tax exemptions. 

It is important to note that while these Public and Community welfare entities are exempted from corporate tax, they must still comply with all relevant local, state, and federal laws. Additionally, they are required to inform the respective authority about any significant changes or developments within their operations. This ensures transparency and accountability while allowing the government to stay informed about the activities of these important Public and Community welfare entities