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Corporate Tax: Obligations for Exempt Entities

Corporate Tax

Corporate Tax: Obligations for Exempt Entities

Individuals or organizations eligible for corporate tax exemptions, referred to as exempt entities, must adhere to specific registration and record-keeping requirements to uphold compliance with tax regulations. Despite benefiting from certain tax advantages, it is essential for exempt individuals or entities to fulfill their obligations to safeguard and retain their exempt status. The following outlines essential aspects of registration and record-keeping obligations for entities exempt from corporate tax.

Corporate Tax

Record-keeping Requirements for Exempt Persons Under Corporate Tax Law in the UAE

According to the UAE Corporate Tax law, both exempt and taxable persons must maintain necessary documents and records for seven years from the end of the relevant tax period.

It’s important to note that the records should be kept for seven years from the end of the tax period they pertain to, not the year of their creation.

For instance, if a taxable person follows cash basis accounting and raises bills or invoices in a tax period preceding the payment period, the seven-year criteria will be met from the start of the year in which the bills and invoices were paid.

Exempt persons need to provide their records and documents to the FTA upon request. These records must be up-to-date and contain all the information required by the FTA, ensuring easy accessibility for compliance purposes

Exemption Criteria Under UAE Corporate Tax Law:

Under the UAE Corporate Tax Law, various criteria determine exemptions for certain entities. Here is an elaboration on each exemption category:

1.      Government Entities:

Entities affiliated with the government are granted exemption. This includes organizations directly linked to government bodies and involved in various activities.

2.      Government-Controlled Entities:

Organizations under direct governmental control fall under this category. These entities are subject to the oversight and influence of the government.

3.      Extractive Business:

Entities engaged in extractive industries must meet specific criteria outlined in Article 7 to qualify for tax exemption. This includes businesses involved in the extraction of natural resources.

4.      Non-extractive Natural Resource Business:

Entities participating in non-extractive natural resource businesses are eligible for exemption, provided they meet the conditions specified in Article 8.

5.      Qualifying Public Benefit Entities:

Organizations meeting the defined criteria under Article 9 are classified as qualifying public benefit entities. These entities serve a public purpose and are eligible for corporate tax exemption.

6.      Qualifying Investment Funds:

Investment funds that meet the criteria outlined in Article 10 are exempt from corporate tax. This includes funds involved in various investment activities.

7.      Public Pensions, Social Security Funds, and Private Pensions:

Entities such as public pensions, social security funds, and private pensions are exempt if they are subject to legal oversight and comply with the specified conditions.

8.      Wholly Owned and Controlled Entities:

Juridical persons incorporated in the UAE, wholly owned and controlled by exempt entities (categories 1, 2, 6, and 7 above), are eligible for exemption if engaged in specific activities outlined in the law.

9.      Entities Under Cabinet Decision:

Entities that are specifically exempted by the cabinet upon the minister’s recommendation fall under this category. This provides flexibility for additional exemptions determined by the government.

Record-keeping Obligations:

  • Duration: Under the UAE Corporate Tax law, both exempt and taxable persons have a shared obligation to retain all necessary documents and records for a period of seven years from the end of the tax period to which they pertain.
  • Note: It’s crucial to note that this timeframe is measured from the conclusion of the relevant tax period and not from the year in which the records were initially created.

For instance, if a taxable person follows the cash basis accounting method, they may have bills or invoices generated in a tax period preceding the one in which the payments are made. In such scenarios, the seven-year requirement is fulfilled starting from the tax period in which the bills and invoices are settled.

Registration Obligations:

·         Not Required to Register:

Government entities, government-controlled entities, persons in extractive businesses, persons in non-extractive natural resource businesses, and non-resident entities earning state-sourced income without a permanent establishment.

·         Mandatory Registration:

Government entities or non-extractive natural resource businesses meeting specific conditions may be subject to registration if they become taxable.

Entities not falling within the exempt categories are generally obliged to register under the Corporate Tax law.

NUFCA: Corporate Tax Advisor in UAE:

NUFCA is a prominent Corporate Tax Advisor in the UAE, offers a range of tax advisory services to assist businesses in navigating the complexities of the new tax laws and optimizing potential tax incentives.

Tax Advisory Services:

NUFCA stands out by providing expert tax advisory services to businesses. These services aim to help entities understand and comply with the latest tax regulations. NUFCA’s team of professionals brings in-depth knowledge and experience, guiding businesses through the intricacies of the tax landscape. This includes staying abreast of any changes in tax laws and leveraging opportunities for tax optimization.

Compliance Assistance:

One of the crucial aspects of NUFCA’s services is ensuring compliance with tax regulations. Non-compliance can result in penalties and legal consequences. NUFCA’s experts work closely with businesses to assess their current practices, identify potential areas of non-compliance, and provide guidance on how to rectify and align with the latest tax laws. This proactive approach helps mitigate risks associated with regulatory non-compliance.

Risk Mitigation:

NUFCA’s advisory services extend to risk mitigation strategies. By conducting thorough assessments of a company’s tax-related processes and practices, NUFCA helps identify and address potential risks. This proactive risk management approach aims to prevent issues before they escalate, fostering a secure and compliant tax environment for the business.

Premium Advisory Services:

NUFCA positions itself as a provider of premium advisory services, implying a commitment to delivering high-quality, tailored solutions to its clients. Whether it’s interpreting complex tax regulations, optimizing tax structures, or providing strategic advice, NUFCA’s premium advisory services are designed to meet the specific needs of each client.

Precise Insights:

NUFCA emphasizes the delivery of precise insights into taxation matters. This involves providing accurate and timely information about changes in tax laws, potential impacts on businesses, and strategic recommendations for compliance and optimization. The goal is to empower businesses with the knowledge needed to make informed decisions in the dynamic tax landscape.

NUFCA serves as a reliable partner for businesses seeking expert guidance in navigating the UAE’s corporate tax environment. The firm’s comprehensive tax advisory services, compliance assistance, and premium offerings position it as a valuable resource for entities looking to ensure tax compliance, manage risks, and capitalize on available tax incentives.

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