UAE announces list of entities exempted from corporate tax

The UAE’s Ministry of Finance (MOF) has issued a new decision that explains which businesses are not required to register for Corporate Tax on the Taxation of Corporations and Businesses.

The decision is issued in accordance with the Corporate Tax Law which requires taxable persons to register for Corporate Tax with the Federal Tax Authority, except in certain circumstances.

Certain exempt include government entities, government-controlled entities, extractive businesses and non-extractive natural resource businesses that meet the necessary conditions under the Corporate Tax Law and are not required to register for Corporate Tax purposes.

A non-resident person will also not be required to register for Corporate Tax if they only earn UAE-sourced income and do not have a Permanent Establishment in the UAE.

The exception stipulated in the decision is in line with international best practices, whereby persons exempted from Corporate Tax such as the federal government, UAE government departments and authorities, other public institutions and other categories referred to above are excepted from tax registration because they are not subject to tax.

Therefore, there is no need for these entities to register with the Federal Tax Authority as long as they continue to meet the exemption conditions, noted in the relevant articles of the Decree-Law.

On Thursday (April 6) MOF announced relief for small and micro businesses, startups and freelancers under the corporate tax, which will come into effect from June 1, 2023.

The Ministerial Decision No. 73 of 2023 specifies that businesses and individuals with revenues of Dh3 million or less can benefit from Small Business Relief initiative as it is intended to support start-ups and other small businesses by reducing their corporate tax burden and compliance costs.

The UAE government last year announced that it would levy a nine per cent tax on the profits of companies exceeding Dh375,000.

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