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List of Exemptions From UAE Corporate Tax    

In the UAE, there’s a law that exempts certain people from paying UAE Corporate Tax . These individuals, called “Exempt Individuals,” don’t have to pay any corporate taxes. Businesses should consult tax experts in the UAE to figure out if they qualify for this exemption. The UAE government provides guidelines, or a person can apply directly to be considered for this exemption. In this blog, we’ll talk about the exemption that the UAE government gives to Exempt Individuals.

What are the Categories of Exemption?

Exempt individuals are divided into different groups. Some people automatically get the exemption, while others have to apply for it.

Automatic Exemption from UAE Corporate Tax Law

In the UAE Corporate Tax Law, certain people are automatically excluded from paying UAE Corporate Tax. The law clearly mentions specific groups that are exempted. For example, government entities and those controlled by the government are automatically exempt. This includes government organizations, certain public benefit groups, and individuals working in certain industries like mining and natural resources.

Exemption claimed through application

According to the UAE Corporate Tax Law, a company that pays taxes can ask to be exempt from them. These organizations can apply for exemptions from corporate taxes. If they meet certain criteria, the Federal Tax Authority might grant them this exemption after looking over their application. This includes investment funds, pension funds, or other organizations owned and controlled by certain exempt individuals.

Exempted Entities

In the UAE, the government has set rules that exempt government entities from paying corporate taxes. These rules apply when a government entity engages in business activities under a license granted by the Licensing Authority. If a company or business operates with a license from this authority, it’s considered separate from the government entity’s other operations, and its financial records are kept separately. 

Each tax period, the authorities will calculate the taxable income for these licensed businesses independently. Any dealings between these licensed businesses and other operations of the government entity are treated as related party transactions, which are subject to special regulations and oversight.

Applicability of exemption

  • Effective Date – Once the taxable person’s application is approved, the exemption starts on the first day of the UAE Corporate Tax period mentioned in the application or on another date set by the Federal Tax Authority.
  • End Date as an Exempt Person – The exempt person stops being exempt if they don’t follow the rules from the beginning of that tax period.

Exemption upon Notification to the Ministry and Meeting Requirements

Some businesses dealing with natural resources don’t have to pay UAE Corporate Tax, but there are conditions – 

Exemption for Resource Businesses

Companies working with natural resources, like mining or drilling, are exempt from corporate tax. However, if they do other activities unrelated to this, they must register for corporate tax.

Definition of Natural Resources

According to the UAE Constitution, natural resources belong to everyone. Businesses involved in getting these resources out of the ground or exploring for them fall into the extractive category. Non-extractive businesses deal with processing these resources for sale.

When an Individual Can Be Exempt

An individual can avoid UAE Corporate Tax if they have permission from the local government to work with natural resources. They should also follow the tax rules set by their Emirate and inform the Ministry of Finance about their exempt status and how they meet the rules. 

UAE Corporate Tax Exemption for Eligible Public Benefit Organisations

Public benefit organizations and charities play a big role in helping society in every country. Governments already work on different projects to improve people’s lives, and these organizations help too. They tackle some of the problems faced by society. That’s why public benefit groups that work to make life better for everyone don’t have to pay corporate taxes. The UAE government recognizes how important these organizations are, so they don’t have to worry about paying corporate taxes either.

Benefits of Exempt Person Status

  • Tax Exemption – The main perk of being an “Exempt Person” is not having to pay corporate taxes in the UAE. This gives them an edge in the market because they don’t have to worry about regular corporate tax rates.
  • Attracting Foreign Investment – Having the title of Exempt Person makes the UAE look good to foreign investors who want a stable business environment with tax benefits. This encourages more foreign investment in the country.
  • Encouraging Public Listing – The UAE wants more companies to become publicly listed, so they give Exempt Person status to these companies. This helps make the stock market more transparent and active.
  • Supporting Social Causes – Encouraging non-profit organizations and public institutions aligns with the UAE’s commitment to social welfare. It helps these groups use their resources more effectively for their missions, benefiting society as a whole.

Entities Exempt from Corporate Tax in the UAE

  • Small and Medium-sized Companies – Companies with sales of up to AED 375,000 don’t have to pay corporate tax. This benefits small and medium-sized businesses, giving them a break from UAE Corporate Tax.
  • Free Zone Companies – Free zone companies receive corporate tax breaks and other incentives regularly. This helps attract more businesses to operate in the free zones.
  • Companies Outside the Mainland – Businesses located outside the mainland aren’t affected by corporate tax. This includes companies operating in free zones or offshore.
  • Shareholder Dividends and Capital Gains – Shareholders don’t have to pay corporate tax on the dividends they receive or the profits they make from selling shares. This encourages investment and benefits shareholders.
  • Intercompany Changes and Transactions – Transactions between different parts of the same company, like transferring assets or making changes within the company group, aren’t subject to UAE Corporate Tax. This helps companies operate smoothly without extra tax burdens.

Final Words 

The corporate tax consultants in Dubai, UAE exempt certain people from paying taxes on their businesses in Dubai. These people, called “Exempt Individuals,” don’t have to worry about corporate taxes. If you’re unsure about your tax obligations, it’s a good idea to talk to tax consultants in Dubai. They can give you the right advice and help you understand if you qualify for any tax exemptions in the UAE, which can be useful for making decisions about your business.

Also read: How To Get Trade Finance

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