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The United Arab Emirates has revamped its laws relating to charitable donations and funds constitution. The new law, namely, the Federal Law No. 3 of 2021 concerning the Regulations of Fundraising and Donations (the ‘new law’), aims to regulate all charity funds and imposes restrictions and stricter control measures. For instance, the new law imposes fines ranging from Aed 200,000 to 500,000 for any person profiting or misappropriating the donations. In its applicability the proposed new regulatory law shall apply to any entity that wishes to collect or provide donations in the State, including the free zones (Article 2).
Lawful methods to set up a charity in the UAE:
The following methods can be adopted in order to set up a valid charitable organization in the UAE:
- For UAE nationals: They should register the charity through the ministry of community development; and
- For Expats: They should register and submit their application to the ministry via their respective embassy or consulate in the UAE.
In Dubai, the entities that can provide recognition as well as license for charitable organizations or NGO’s or other humanitarian organizations, include:
- International Humanitarian City
- Islamic Affairs and Charitable activities department
- Community development authority
Stricter checks incorporated by the new law:
In line with the international best practices for anti-money laundering, the new law imposes the following strict measures on all registered charitable entities:
- Collection or receipt of donations outside the UAE (Article 13):
- The licensees and the authorized entities shall not collect or receive donations or accept gifts, wills or aids from any person or entity from outside the UAE, unless according to the controls and procedures defined by the Executive Regulation of the new law;
- The licensees and the authorized entities shall provide the competent authority with a detailed report on the donations, gifts, wills or aids that have been collected or received from outside the UAE, according to the controls.
- Delivery of Donations Outside the State (Article 14): No donations shall be delivered, provided or transferred to any person or entity outside the UAE, unless according to the controls and procedures defined by the Executive Regulation of this Law.
- Bank Transfers to Outside the State from Donation Accounts (Article 15): Banks and financial facilities in the UAE shall not process any financial transfers to outside the UAE from the bank accounts of donations, unless according to the controls and procedures defined by the concerned entities in the UAE.
Obligations of the charities (Article 24):
The new law has imposed strict compliance measures for all registered charitable organization in the UAE, which include amongst others:
- Terms and conditions of permits.
- Keeping regular electronic records for registration of the donations resulting from the permits.
- Submission of periodical reports on the fundraising operation to the authorized entities.
- Delivery of the proceeds of fundraising to the authorized entities no later than (30) days from the expiration date of permit.
- Any other obligations set out in the Executive Regulation of this Law.
The proposed new law is focused to ensure stricter regulatory control in fundraising, and aims to support social development and humanitarian donations by aligning them with the traditional Emirati values and ethos. The new law also proposes to ensure that charitable fronts are not utilized for any illicit means such as money laundering, tax evasion or similar criminal acts.