The introduction of the Federal Corporate Tax in UAE has raised crucial questions regarding tax implications for non-profit organisations and international investors alike. Be it a French charitable foundation or an educational institution wanting to create a compliant presence, understanding how to maintain tax-exempt status becomes paramount.
This guide from Flyingcolour® explains what a QPBE is and under what conditions a QPBE status can be granted, ensuring that your public mission remains exempt from Corporate Tax.
Definition and Role of a Public Benefit Entity (QPBE)
A QPBE is an entity that is established and operated exclusively to conduct activities of public interest, as per Article 9 of Federal Decree-Law No. 47 of 2022, the Corporate Tax Law.
The main exception to Corporate Tax status is QPBE for entities that enhance welfare within the community or are involved in socio-economic development.
Recognized Objectives
To qualify as a public benefit organization, the entity should pursue non-profit purposes in the following areas of:
- Humanitarian aid and charity.
- Cultural and religious preservation.
- Education and scientific research.
- Healthcare and social services.
Environmental protection and animal care.
Exemption from Corporate Tax: The Important Conditions
Public benefit entities have to satisfy the rigid conditions laid down by the law and the Cabinet to avail themselves of complete Corporate Tax exemption, particularly Decision No. 37 of 2023:
Exclusive Non-Commercial Activity
Primary Non-Profit Purpose: The organization must be operated exclusively for a public benefit purpose.
No Private Gain: All income and assets must be used only to achieve its public benefit purposes. The entity shall not allow any founder, member, shareholder, or trustee to personally benefit from it, directly or indirectly.
Government Recognition and Approval
The entity must obtain the status of a QPBE.
Filing an Application for Exemption: An entity shall file an application with the relevant federal or local authority for verification.
Cabinet Approval: The status of QPBE takes effect only from the beginning of that tax period if the Council of Ministers (Cabinet) officially recognizes the entity through a published resolution.
Compliance and Transparency
Tax Registration: The QPBE shall seek registration from the FTA in order to be granted a TRN.
Annual Declaration: Even though it is exempt from tax, it must file an annual declaration with the FTA.
Record Keeping: It has to maintain proper books of account, both financial and operational, for at least seven years to demonstrate that the activities carried out were in line with its public benefit objectives.
3. Tax Benefits to QPBEs and Their Donors
Public Benefit entity status is a dual-advantage mechanism in that it exempts the entity itself, while it encourages donations.
Exemption of Corporate Tax
Once recognized, the QPBE is exempt from Corporate Tax with respect to all of its revenues, which include grants, donations, and income generated through its public benefit activities.
Deductibility of Contributions
Businesses liable under Corporate Tax, including French subsidiaries formed in the UAE, may deduct from their taxable income the donations, grants, or contributions made to the QPBE, subject to the latter's inclusion in the official Cabinet list.
Consequences of Non-Compliance
Non-compliance with the eligibility criteria may result in serious legal and fiscal implications, including the revocation of tax exemption, making the entity retrospectively liable for Corporate Tax.
The most material threat occurs if the QPBE engages in activities that generate substantial business income not directly connected to its public interest nature and/or if its assets are transferred to members for private benefit.
Flyingcolour®: Your Compliance Partner inUAE
The nuances of tax exemptions for public benefit entities require precise local expertise. Flyingcolour® helps international organizations structure their presence in the UAE to establish and maintain their exempt status.
We accompany you through:
Eligibility Verification: We evaluate your organization's structure and activities to confirm that they meet the stringent QPBE criteria. Application Process: We handle the submission of the exemption application and liaise with the competent authorities until approval by Cabinet is obtained. Ongoing Compliance: We establish all the record-keeping and annual reporting systems needed by the FTA to maintain the exemption status. Trust Flyingcolour® to ensure that your public interest mission in the UAE is successful, sustainable, and compliant. Conclusion The Qualifying Public Benefit Entity status is a keystone of the UAE Corporate Tax framework, granting tax protection to organizations serving the greater good. The most important factor that will provide any organization with this exemption status is to operate exclusively for non-profit motives and to obtain formal recognition from the Cabinet. In such a case, if French organizations seek social impact in the UAE, proper planning and support by Flyingcolour® are highly necessary.
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.