What are the provisions for corporate tax exemptions in UAE?

The UAE corporate tax law provides various exemptions for qualifying entities, such as state entities, government-controlled institutions, and investment funds. Understanding these provisions is crucial for compliance. Corporate Tax Law in UAE furnishes provisions for exemption from corporate tax to distinct Taxable Persons. Cabinet Decision No.7 of 2023 stipulates conditions for tax registration and the timeline for exempt persons to apply for exemption, as well as guidelines for determining alternative effective dates for exemptions. These provisions aim to streamline the corporate tax system, foster compliance, and facilitate business operations within the UAE. Thus, it is advisable for Taxable Persons to consult Tax Consultants in UAE to effectively ensure compliance with the Corporate Tax Law.   

Corporate Tax Registration and Exemption Application

1. The following entities are exempt from registering for corporate tax with the authority:
   • Government entities.
   • Government-controlled entities.
   • Persons engaged in extractive businesses meeting Article 7 conditions of the Corporate Tax Law.
   • Persons engaged in non-extractive natural resource businesses meeting Article 8 conditions of the Corporate Tax Law.
   • Non-resident persons with only state-sourced income under Article 13 of the Corporate Tax Law, lacking a permanent establishment in the state as per the Corporate Tax Law provisions.

The authority may request exempt persons, as per the Corporate Tax Law to submit an annual declaration confirming their continued compliance with the exemption conditions."

Read more: Exempt businesses under the corporate tax in UAE

Timeline to Apply for Exemption and its Effective Date

1. Individuals falling under the categories aforementioned must apply for exemption within 60 business days from the end of the Tax Period in which they meet the exemption criteria.
2. If the Authority approves the exemption application, the exemption will be effective from the start of the specified Tax Period in the application.
3. The Authority has the discretion to determine an alternative effective date for the exemption, different from the date in the following scenarios or similar ones:

1. • If the registration form specifies an incorrect Tax Period, the exemption will be effective from the correct date.
   • If the applicant is acquired by one or more individuals, the exemption will not be granted from the start of the Tax Period if the exemption criteria were not met at that time. The Authority will determine a different date for the exemption to begin, ensuring that it starts after fulfilling all remaining tax obligations.
   • If the exemption application contains an incorrect Tax Period, and the Authority receives sufficient supporting information demonstrating that the criteria were met in a subsequent Tax Period, the exemption will be effective from the date of meeting the criteria.
   • Any other instances specified in a Decision issued by the Cabinet

Abrogation of Conflicting Provisions

As per the Corporate Tax Law in UAE, any provisions that contradict or are inconsistent with the provisions outlined in the aforementioned Decision will be abrogated. This ensures that the regulations and guidelines specified in this Decision take precedence and are fully implemented. The aim is to create a cohesive and harmonized framework for corporate tax, eliminating any conflicting provisions that may cause confusion or ambiguity in the application of the law.

Read more: Exemptions under Corporate Tax Law, UAE

Implementation of the Decision

As per the UAE corporate tax law, the implementation of this Decision involves publishing it in the Official Gazette. This official publication serves to notify the public and relevant stakeholders about the provisions and regulations outlined in the Decision. By ensuring proper implementation, the UAE aims to promote transparency and adherence to corporate tax regulations.

By providing provisions for exemption from corporate tax, the Decision outlines specific criteria and timelines for registration and application for exemption. This ensures clarity and compliance with tax regulations while promoting a fair and transparent corporate tax environment in the UAE.

Choose Top Tax Consultants in UAE

To effectively ensure compliance with the Corporate Tax Law to which noncompliance accrues hefty fines, it is advisable for Taxable Persons to consult Tax Consultants in UAE, Thus, contact us today and we shall be glad to assist you.