The introduction of UAE Federal CT has made it particularly relevant to have confirmation of their tax status by non-profit organisations, including charitable groups that may be based in or derive from Australia. From an Australian charitable foundation to international educational institutes, maintaining their tax-exempt status is critical in maximising the good they can achieve for the community.
This guide from Flyingcolour® explains what a Qualifying Public Benefit Entity is and what conditions need to be satisfied for such status to be granted, so that your public mission will not be subject to Corporate Tax.
Definition of Public Benefit Entity (QPBE)
A QPBE is an entity organized and operated exclusively to conduct activities serving the public interest in accordance with Article 9 of Federal Decree-Law No. 47 of 2022, known as the Corporate Tax Law.
The QPBE status is the main exemption to Corporate Tax for entities that make contributions to community welfare and socio-economic development.
Recognized Objectives
To be regarded as a public benefit organization, the entity should have non-profit activities in commonly known fields, including:
- Humanitarian aid and charity.
- Cultural and religious preservation.
- Education and scientific research.
- Healthcare and social services.
- Environmental conservation and animal protection.
Key Criteria for Exempting Tax on Profits
To be able to enjoy full exemption from Corporate Tax, a public benefit entity must meet some very strict, three-pronged conditions by law and Cabinet-issued decisions, notably Decision No. 37 of 2023:
I. Exclusive Non-Commercial Activity
Primary Non-Profit Purpose: The organization must be operated exclusively for a public benefit purpose.
No Private Gain: All of its income and property must be used to further its public benefit objects. The founders, members, shareholders or trustees should not benefit financially in any direct or indirect manner from the organisation. This ensures that resources are not diverted from the mission.
II. Government Recognition and Approval
The most important barrier consists of the official recognition of the entity as a QPBE.
Exemption Application: An entity has to file an exemption application to the concerned federal or local authority for verification.
Cabinet Approval: The QPBE status is only effective from the tax period in which the Council of Ministers (Cabinet) publishes a resolution officially recognizing the entity. Listing on this published resolution is the final proof of status.
III. Compliance and Transparency
Once approved, ongoing compliance is required to retain this status.
TRN: The QPBE must register with the FTA and obtain a unique number known as the Tax Registration Number.
Annual Declaration: Even when an individual is exempt from tax, an annual declaration must be filed with the FTA.
Record-Keeping: Detailed financial and operational records are to be maintained for at least seven years to prove compliance with its public benefit objectives.
3. The Tax Advantage for QPBEs and Donors
The public benefit entity status is a dual-advantage mechanism that protects the income within the entity and encourages corporate support.
Exemption from Corporate Tax
Once identified, the QPBE is exempt from Corporate Tax with respect to all its income, including grants, donations, and income derived from its public benefit activities.
Deductibility of Contributions
Business entities liable for Corporate Tax in the UAE, including Australian subsidiaries, can deduct from their taxable income the donations, grants, or contributions made to a QPBE, provided the latter is officially listed on the Cabinet resolution. This incentive encourages companies to support social causes.
Consequences of Non-Compliance
Failure to comply with the qualifying conditions may result in serious legal and financial consequences, including the loss of the tax exemption granted, an entity being brought under Corporate Tax retrospectively.
The most significant risk associated with the QPBE is if it were to undertake commercial activities that are not related to its public interest objective, or if assets are diverted for private benefit to its members.
Flyingcolour®: Your Compliance Partner in the UAE
Navigating the complex details of tax exemptions for a public benefit entity requires precise local expertise. Flyingcolour® helps international organizations structure their presence in the UAE so that the exempt status is established and maintained.
We accompany you through:
Eligibility Verification: We assess the structure and activities of your organization to see whether they meet the strict QPBE criteria.
Application Process: We handle the process of submitting the exemption application, followed by liaison with the competent authorities until approval from the Cabinet.
Ongoing Compliance: We set up the necessary record-keeping and annual reporting systems required by the FTA to maintain the exemption status.
Trust Flyingcolour® to ensure your public interest mission in the UAE is successful, sustainable, and fully compliant.
Conclusion
The Qualifying Public Benefit Entity status is a cornerstone of the UAE Corporate Tax framework, providing critical tax protection to organizations operating in service of the greater good. Operating exclusively for non-profit purposes and securing official Cabinet recognition hold the key to benefiting from this exemption. Expert planning and support from Flyingcolour® are indispensable for any Australian organization seeking to create social impact in the UAE.
To learn more about Qualifying public benefit entity in UAE, book a free consultation with one of the Flyingcolour team advisors.
Disclaimer: The information provided in this blog is based on our understanding of current tax laws and regulations. It is intended for general informational purposes only and does not constitute professional tax advice, consultation, or representation. The author and publisher are not responsible for any errors or omissions, or for any actions taken based on the information contained in this blog.