What Are The Implications of VAT on Designated Charities in UAE?
The businesses operating in the UAE are required to be aware of the tax legislation prevailing in the land, especially the VAT and the corporate tax laws that have been implemented lately. The business must ensure that they stay compliant with the regulations to avoid any chances of non-compliance and further consequences following it. The same is for the charities in the UAE; as VAT is a consumption tax, the charities in the UAE must be aware of the implications and the application of the VAT on the activities of the charities. In this blog, we have highlighted the implications of VAT on the designated charity in the UAE.
VAT on Charities
For the entities that are engaged as charities, the VAT will be applicable in default as it is a consumption tax for the goods and services supplied by the entities that have registered themselves under the VAT. If, in the circumstances, the charities in the UAE supply any goods or services in return for any charge, then it will be considered a business activity, and hence it will attract VAT, considering the charities as a taxable entity. Apart from the application of the VAT, the charities can also apply for VAT returns, subject to certain conditions.
Designated Charities under VAT
For the entities involved in charity activities in the UAE, it is important to have a clear idea regarding the designated charities and other charities. The designated charity entities enjoy a special set of VAT recovery rules that is applicable only if these are recognized as designated charities. The charity to be recognized as a designated charity under the VAT must comply with certain conditions that are set by the authorities. If the entities fail to meet such conditions, then they won't be recognized as designated charities, resulting in the cessation of certain special VAT rules.
Conditions to be met for being recognized as designated charities under UAE VAT
There are certain conditions that are to be met by the charities for being recognized as designated. These conditions include the following:
- From the following, any one condition is to be met.
- The charity must gain approval from the Ministry of Community Development for carrying out the charitable activity as a designated charity in the UAE. Or
- The charity establishes itself as a charity under the Federal or Emirate Decree. Or
- It must have a license to operate as a designated charity by any agency of the federal or emirate governments that is authorized to grant similar licenses to the charities. The objective of such an issuance of a license must be to provide education, healthcare, public welfare, science, or any other such activities.
- The other mandatory condition includes that the charity is bound to carry out its activities in compliance with the terms of any approval or license or any such authorisations that might be laid down by the above-mentioned authorities.
- The charitable activities must be conducted on a not-for-profit basis.
- The funding of such charities must be done via grants and donations received.
The authorities mentioned in the above criteria may consider the following condition while deciding whether to approve for the designated charity:
- Whether the charity operates only the charitable activities for which the license has been issued
- Ensuring that the charity is not involved in any kind of trading activities
- Ensuring charity is managed by fit and proper persons
These are the requisites that are to be met in order to be eligible for the designated charity. The charities must also ensure that it is registered under the VAT to enjoy the further special tax recovery rules.
CDA’s Role in VAT Compliance
Being one of the leading accounting and auditing firms in UAE, CDA has a well-driven team of tax experts with a polished set of tax skills, which enables the clients to ensure their compliance and filing of returns on time. Our experts can serve you with multiple tax benefits and premium services, providing you with a competitive edge that the other firms don’t have. We provide you the assurance that our custom-tailored tax services will enable you to get ahead of the competitors and reduce the tax liabilities of the business.
To know more about varied tax services, contact our team of professionals now.
