The United Arab Emirates' Ministry of Finance (MOF) has outlined a clear path for public benefit organizations to navigate the recently implemented corporate tax law. This move aims to ensure entities dedicated to social good can continue their valuable work without undue financial burden.
The Corporate Tax Law, effective June 2023, established a 9% tax rate for most businesses operating within the UAE. However, the Ministry recognized the potential negative impact this could have on non-profit organizations and foundations. In response, the MOF implemented a "Qualifying Public Benefit Entity" (QPBE) designation. Entities meeting the QPBE criteria are exempt from corporate tax.
The designation applies to organizations established and operated exclusively for purposes such as religious activities, charitable giving, scientific research, arts and culture, education, healthcare, environmental protection, and animal welfare. Professional associations and chambers of commerce promoting social welfare or public benefit can also qualify.
Obtaining QPBE status requires fulfilling specific criteria outlined in Article 9 of the Corporate Tax Law. These criteria ensure the organization functions with a genuine public benefit motive. Additionally, entities must maintain compliance with all relevant federal and local regulations.
The MOF plays a key role in administering the QPBE program. Organizations seeking tax-exempt status must register with the Federal Tax Authority and obtain a tax registration number. The Ministry also maintains a list of pre-approved QPBE entities at the federal and emirate levels. This list includes religious institutions, government-funded social programs, sports club charities, and educational trust funds. The list is not exhaustive, and government entities can propose additions or removals based on documented justification.
The MOF's initiative demonstrates a commitment to fostering a supportive environment for public benefit organizations. By mitigating the financial constraints imposed by corporate tax, the UAE can empower these entities to continue delivering vital services and programs that enrich the lives of citizens and residents.