UAE Ministry Clarifies Exemptions from Corporate Tax Registration

The UAE Ministry of Finance has announced the list of public and private sector organizations that are exempt from the new corporate tax that will come into effect in June 2023. The Ministry issued Ministerial Decision No 43 of 2023 to explain who will be excluded from corporate tax registration.

A non-resident company, which earns UAE-sourced income but does not have a permanent establishment in the country, will not be required to register for corporate tax, the ministry stated. Furthermore, government and government-controlled organizations, extractive and non-extractive natural resource businesses that meet the set conditions, pension or investment funds, and public benefit organizations will also be exempt.

In December 2022, the UAE introduced the federal corporate tax with a standard statutory rate of 9%. The corporate tax will come into effect for businesses whose financial year starts on or after June 1, 2023. In the UAE, businesses must adhere to a self-assessment system when it comes to corporate tax. This implies that companies are responsible for verifying the accuracy and compliance of their documentation submitted to the Federal Tax Authority (FTA).

According to Article 51 of the Corporate Tax Law, taxable individuals are obligated to register for corporate tax with the Federal Tax Authority, unless certain conditions apply. The newly released decision aligns with this article and specifies the exceptions where registration for corporate tax is not required.

The exception stipulated in the decision is in line with international best practices, the Ministry said on Monday.The government of the UAE has exempted existing free zone entities from corporate tax because they are among the drivers of the UAE’s economic growth, the Ministry said in December.

Small businesses in the UAE with revenue of Dh3 million or less can benefit from a new corporate tax relief program, the Ministry announced last week. In accordance with Article 21 of the corporate tax law, the Small Business Relief ministerial decision was issued, which treats the “taxable person as not having derived any taxable income in a given tax period where the revenue did not exceed a certain threshold,” the Ministry said at the time. Small Business Relief aims to support start-ups and other small or micro-businesses by reducing their corporate tax burden and compliance costs.

The UAE government aims to make the country more competitive by implementing a range of measures that make it easier for businesses to operate in the UAE, including simplifying administrative procedures and reducing the cost of doing business. The corporate tax law is one such measure that will help to streamline the tax system in the UAE and make it more efficient.

In addition to the corporate tax, the UAE has introduced other measures to boost its economy, including the introduction of a value-added tax (VAT) in 2018. The VAT is levied at a rate of 5% on the supply of most goods and services in the UAE.

The UAE has emerged as a global hub for businesses looking to expand into the Middle East and North Africa region. The country has a business-friendly environment, modern infrastructure, and a skilled workforce. The UAE’s strategic location between Asia, Europe, and Africa makes it an ideal location for businesses looking to expand their operations globally.

In conclusion, the UAE Ministry of Finance has announced the list of public and private sector organizations that are exempt from the new corporate tax that will come into effect in June 2023. The decision is issued in accordance with Article 51 of the Corporate Tax Law, which requires taxable persons to register for corporate tax with the Federal Tax Authority, except in certain circumstances.