Let’s see who is Exempt from the New UAE Corporate Tax Lawy. In the ever-evolving landscape of corporate taxation, understanding the nuances of exemptions and liabilities is paramount for businesses to thrive. The UAE Corporate Tax Law encompasses provisions that outline exemptions for certain entities, relieving them from the obligation to pay corporate tax. In this article, we delve into the concept of “Exempt Persons” and shed light on the criteria that lead to automatic exemption under the UAE Corporate Tax Law.
Automatically Exempt from the New UAE Corporate Tax
Exemption from corporate tax is not a one-size-fits-all concept. Under the UAE Corporate Tax Law, specific categories of persons are deemed automatically exempt from corporate tax. The law explicitly identifies certain entities that fall under this exemption umbrella. A prime example of this is Government Entities and Government-Controlled Entities, which are automatically considered Exempt Persons under the law.
Exemption Claimed Through Application
For entities not covered by automatic exemption, the UAE Corporate Tax Law allows for the possibility of claiming exempt status through a formal application. These entities can apply for exemption from corporate tax, subject to the fulfillment of certain conditions. The Federal Tax Authority carefully examines such applications to determine eligibility and compliance.
Government and Government-Controlled Entities
Government-owned and controlled entities hold a special status in the realm of corporate tax exemption. According to Article 5 of the UAE Corporate Tax Law, all Government and Government-Controlled Entities are automatically exempt from corporate tax unless they engage in business activities beyond their ‘Mandated Activity.’ This mandate ensures that core government functions remain exempt while commercial activities are subjected to tax.
Article 5: Government Entity Working Under License
When a Government Entity conducts business under a license, it is regarded as an independent business entity. Consequently, such a Government Entity becomes liable for corporate tax, as per the provisions of the UAE Corporate Tax Law. The entity must maintain separate financial statements for its independent activities and calculate taxable income separately for each tax period. Transactions between the Government Entity and its independent business are treated as related party transactions.
Applicability of Provisions of Article 6: Government Controlled Entities
Government-Controlled Entities, as defined in Article 6 of the UAE Corporate Tax Law, are also exempt from corporate tax, provided they engage solely in Mandated Activities. Mandated Activities are those specified by the legal instrument that establishes the Government-Controlled Entity. Activities falling outside this mandate are considered independent business activities and are subject to corporate tax.
Navigating the intricate landscape of exemptions and liabilities under the UAE Corporate Tax Law is a crucial aspect of business operations. While Government Entities and Government-Controlled Entities enjoy automatic exemption, other entities can seek exemption through a formal application process. Understanding these nuances not only ensures compliance but also enables businesses to make informed decisions that align with their growth strategies.
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