Are donations deductible for Corporate Tax?

Article 33 – Non-deductible Expenditure No deduction is allowed for: 1. Donations, grants or gifts made to an entity that is not a Qualifying Public Benefit Entity. 2. Fines and penalties, other than amounts awarded as compensation for damages or breach of contract. 3. Bribes or other illicit payments. 4. Dividends, profit distributions or benefits of a similar nature paid to an owner of the Taxable Person. 5. Amounts withdrawn from the Business by a natural person who is a Taxable Person under paragraph (c) of Clause 3 of Article 11 of this Decree-Law or a partner in an Unincorporated Partnership. 6. Corporate Tax imposed on a Taxable Person under this Decree-Law. 7. Input Value Added Tax incurred by a Taxable Person that is recoverable under Federal Decree-Law No. (8) of 2017 referred to in the preamble and what replaces it. 8. Tax on income imposed on the Taxable Person outside the State. 9. Such other expenditure as specified in a decision issued by the Cabinet at the suggestion of the Minister. Federal Decree-Law No. 47 of 2022 and its amendments – Unofficial translation (as published by the Ministry of Finance) 39 Chapter Ten – Transactions with Related Parties and Connected Persons

Article 21 – Small Business Relief 1. A Taxable Person that is a Resident Person may elect to be treated as not having derived any Taxable Income for a Tax Period where: a. the Revenue of the Taxable Person for the relevant Tax Period and previous Tax Periods does not exceed a threshold to be set by the Minister; and b. the Taxable Person meets all other conditions prescribed by the Minister. 2. Where Clause 1 of this Article applies to a Taxable Person, the following provisions of this Decree-Law shall not apply: a. Exempt Income as specified in Chapter Seven of this Decree-Law. b. Reliefs as specified in Chapter Eight of this Decree-Law. c. Deductions as specified in Chapter Nine of this Decree-Law. d. Tax Loss relief as specified in Chapter Eleven of this Decree-Law. e. Article 55 of this Decree-Law. 3. The Authority may take the necessary measures to verify the compliance with the conditions of Clause 1 of this Article, and may request any relevant information or records from the Taxable Person within the timeline prescribed by the Authority. Federal Decree-Law No. 47 of 2022 and its amendments – Unofficial translation (as published by the Ministry of Finance) 28 Chapter Seven – Exempt Income

to recognise, and pay Corporate Tax on, the gain of AED 100,000 from the vehicle sale. If ABC LLC does not elect for Small Business Relief, ABC LLC and DEF LLC can benefit from intra-group relief on the sale of the vehicle provided that DEF LLC made an election to apply the transfers within a Qualifying Group relief.52 This means that the sale will be treated as having taken place at net book value and no gain or loss will arise for either ABC LLC or DEF LLC. However, by not electing for Small Business Relief, ABC LLC would have to calculate and pay Corporate Tax on its Taxable Income by filing a Tax Return. Deductions Certain expenditures are disallowed or limited for Corporate Tax purposes. As these rules differ from ordinary accounting rules, this means that, when calculating their Taxable Income, Businesses must exclude or adjust some deductions. 5.5.1. Deductible expenditure rules do not apply to those who elect for Small Business Relief The rules on deductions do not apply to Businesses in Tax Periods for which they have elected for Small Business Relief.53 Small Business Relief is based on Revenue alone and, as it works by treating Businesses as if they had no Taxable Income, there will be no requirement to consider deductions. This means that any expenditure, even if it would not ordinarily be allowable for Corporate Tax purposes, will not impact a Business that has elected for Small Business Relief. Example 16: Deductible expenditure Mr X is a Resident Person who conducts Business in Dubai. During his Tax Period ending 30 September 2024, Mr X’s Revenue was AED 1,850,000. During the same Tax Period, he makes a donation of AED 100,000 to a local charity that is not a Qualifying Public Benefit Entity. Donations made to entities that are not Qualifying Public Benefit Entities are not allowed to be deductible for Corporate Tax purposes. However, as the provisions of the Corporate Tax Law relating to deductions do not apply when a Business is seeking to benefit from Small Business Relief, the donation made and the fact that 52 Article 3 of Ministerial Decision No. 132 of 2023. 53 Article 21(2)(c) of the Corporate Tax Law. Corporate Tax Guide | Small Business Relief | CTGSBR1 33